It’s important to remember the impact that taxes can have on Bitcoin mining. The IRS has been looking to crack down on owners and traders of cryptocurrencies as the asset prices have ballooned in recent years. Here are the key tax considerations to keep in mind for Bitcoin mining.
- Are you a business? If Bitcoin mining is your business, you may be able to deduct expenses you incur for tax purposes. Revenue would be the value of the bitcoin you earn. But if mining is a hobby for you, it’s not likely you’ll be able to deduct expenses.
- Mined bitcoin is income. If you’re successfully able to mine bitcoin or other cryptocurrencies, the fair market value of the currencies at the time of receipt will be taxed at ordinary income rates.
- Capital gains. If you sell bitcoins at a price above where you received them, that qualifies as a capital gain, which would be taxed the same way it would for traditional assets such as stocks or bonds.
Check out Bankrate’s cryptocurrency taxes guide to learn about basic tax rules for Bitcoin, Ethereum and more.