Hi Everyone - I’ll be creating an LLC for mining and am curious how you have structured yours and what your strategy is to obtain more miners and pay the least amount in taxes. I’ve been looking into self-directed ROTH IRAs to see if it’s better tax wise, but not sure if that’s the best way to go.
Any suggestions? I’ll be speaking with my accountant hopefully this week regarding the best course of action but am not sure if he’s had much experience with crypto.
I’m interested in the same thing , especially potentially redirecting some of the earnings into a retirement product.
Well, a Roth IRA does nothing to lower your current taxes, though profit is tax free once you retire
I’d talk to a CPA who doesn’t have any incentive to promote IRA (Roth or otherwise) strategies using LLCs. You need objective advice.
I haven’t looked into using IRAs specifically for mining but I have for real estate. My take at the time was fees were high and the rule were too limiting particularly with respect to the use of leverage (mortgages) and the associated tax implications.
Overall, you have to be very careful and follow IRS rules closely. Otherwise, the IRS will negate the tax benefit of the IRA and potentially assess taxes and/or early distribution penalties. I believe that you’d be less likely to unknowingly break an IRS rule if you have your rigs hosted by a 3rd party, e.g. Compass, as self-hosting involves having possession of your rigs, which likely wouldn’t be permitted by the IRS. I’m also not sure but I believe that the LLC cannot be member managed, though a tax attorney can advise.
Good luck and please post what you find out.
LLCs do not affect your taxes. LLCs protect to you from any legal implications.
You have essentially created a mining business where you can write off all business related expenses to include but not limited to; hardware, electricity, real estate, pool fees, and maintenance costs. I’m sure Vosk is deducting Tails’ expenses as the CMO, Chief Mining Officer, since she does appear in his videos.
You will need to file self employment forms on top of your regular employment, W2. Being self employed you will need to pay the FICA taxes. Additionally, if the business makes over $40K a year, you then can pay yourself a W2 with a K1 pass through to minimize taxes even more, a savings up to 30% in taxes. Hire your immediate family members such as your kids or spouse to be able to collect a W2 and have earned income to be eligible for contributing to a Roth IRA, for the kiddos.
Keep track of all your expenditures. If you are just starting, like myself, you will end up in a loss in the business which in turn can reduce your AGI, adjusted gross income. This number is on the last line of your 1040 and from there you start figuring out the taxable income after exemptions and other credits.
I plan on purchasing solar for my in-home farm and deduct it from my business earnings.
All options to consider for now or later. Seek advice from a tax profesional and/or lawyer.
If you find a CPA that knows crypto, please pass the info along. I’m in the same boat, trying to setup some sort of company to contain the taxes of buying machines, space rental, electric…
I’m interested in making an LLC as well, some good info so far.
Let me know how the solar install goes, I"m looking as well, however in Ohio we have way more windy days than sunny.
Talk with a CPA who specializes in helping small businesses. With that said my CPA set my business up as a Limited Partnership(LP). As an LP, you don’t have to pay self employment tax and social security tax when you make draws. It seems that as far as saving money, LLC’s don’t do a whole lot. Look into a LP.
Thanks for the information guys! I called my accountant and he’s looking into everything for me, but I also have looked into Mark Kohler’s strategies (although he could be selling his self-directed ROTH business).
I’ll post an update once I speak further with my accountant.
Also, for anyone interested, Mark Kohler (CPA and tax attorney with a crypto wheelhouse) is holding a crypto tax summit on Saturday, Jan 29th. Being held in Arizona but I’ll be signing up to attend virtually.