How would I be taxed as a small business?

I am considering starting a business for mining. I could write off my investment in equipment. I’m having a hard time wrapping my brain around taxes in general though - would I have any taxable revenue on bitcoins without selling? I’m hoping some veterans can chime in?

Thanks to anyone taking the time to read this!

And Happy Thanksgiving!

Consult a tax professional as I am not one but in my understanding the income you make at the time the coins are mined and sent to your wallet is considered income and then when you sell it would produce a capital gain on loss just like if you were selling a share of stock. This is based off of us tax law so if you are in another country you will need to look into that countries regulations and treatment of crypto assets.

This is something I’ve been wondering about as well. I’m on track to make about $15K this year from mining, and I want to reinvest a chunk of that into some new machines, and hopefully get to $30K+ next year. So I’ve been wondering if it makes sense to start a company and keep all of the machine purchases, and things under that, but I wasn’t sure of the tax implications.

Taxes, Yup you’ll have to pay tax on the value of the bitcoin you receive at the time you receive it. For example if you get 1 bitcoin at current 57k price you will get taxable revenue of 57k right then and there. Once you sell that bitcoin it will be subject to capital gain or loss. Unless you’re an expert book keeper I’d advise getting some type of software to record these transactions for you and do the calculations, as the transaction log can get quite lengthy.

The equipment can’t be written off all at once, but rather on a depreciation schedule. Check out GAAP standards for how your books must look like. This is the rulebook for us Americans on how we are supposed to account.

This is my understanding of it, of course take @Amber 's suggestion and please consult a tax professional to get information on your specific situation, as local laws, state laws, zoning, etc all play a factor into how you are taxed.

HOWEVER, Trump eliminated a lot of the personal deductions. If you want to write your expenses off you WILL need an LLC. If you make more than 50k profit a year off your business, I’d suggest making it an S-Corp to take advantage of income tax savings.

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Aaron is correct.

You are liable for taxes on any mined crypto, at it’s value when it is mined. If you sale the crypto for more than the mined value, you are taxed at 37% on the increase in value, if you’ve held it for less than 1 year. If you hold the coins for over 1 year, the capital gains tax decreases to around 10% (Just what I’ve read in my research the last few days).

You are best off forming an LLC in your state and getting an EIN (Form SS-4, I believe). This will allow you to depreciate the costs of the machines. This will also allow you to deduct the electric costs, rent for the mining space, repair costs, and many other benefits that aren’t available if the IRS views it as a hobby.

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LLC would be for a Legal entity, a sole prop or an s-corp would be for the tax portion. Anyway, best bet would be to call a few local CPAs - see if they’ve worked with people that have done crypto mining, and go have a talk with them. They’ll typically talk you through the details of what you need to setup our business and what to keep track of.

  • Get an EIN
  • Get a CPA
  • Get a business bank account
  • Record all mining income
  • Record all mining purchases
  • Record/Track electric/hosting costs
  • Understand short/long capital gains
  • Discuss with your CPA all of the above

hope that helps!

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