Hello! This is my first post on this forum as I found you all via YT. I have been wanting to get into mining for a couple years after trading and learning about crypto currency. I am very bullish on BTC as well as ETH and Cardano, but now I feel it’s time to start the mining side of things. Boy it’s a lot to learn but I love the challenge. I have been watching videos and reading threads and hitting this subject hard. I am going to start out with BTC as I am uncertain on the ETH 2.0 coming out and don’t want to spend money on an ASIC that possibly won’t be of use sooner than expected. Along with eye balling some s19s I am reaching out to hosting sites in Oklahoma and Nebraska as I live in Kansas. I decided since I am very familiar with creating businesses I will do all this as a business to regain some cost to get to ROI faster. This being said like all of you. I wish to increase the size of the mining industry. For those of you who went down this path what direction fit best for you?
LLC
S Corp
Sole Proprietorship
Thank you all for your time in posting in this forum to teach us newbies about mining. I enjoy reading and learning from the skilled!
After doing more research on how to approach to mine as a buisness, the best and most streamline way I have found was to start out with is just being a Sole Prop. I say this for a couple reasons, at the beginning your main focus is to buy miners and other buisness related items under a business for tax write offs, if you put your profits on paying back loans, buying more machines or anything to GROW or MAINTAIN that buisness you are NOT taxed in doing so. Second is this way you can quickly get an EIN or Tax ID number with a week to get going and it’s the most cost effective way.
But my particular plan is once I scale to an amount of miners that I feel I have my risk hedged as well as my profits I’d like to keep for living expenses then I will be planning on hiring and LLC attorney to build an LLC with Crypto Roth IRAs with it as well as changing the tax purposes to an S Corp or C Corp. LLC is not for tax advantages but only for coverage and protection of the company as the S or C Corp is the taxation of the LLC.
To some it up, start out small and simple to keep focus on building the company as well as keeping start up cost low until you are at enough miners or profit to build the your company in the next phase.
Hopefully this helps you all or gives some insight.
Hi Carl, thank you for this information. I think sole prop seems like the way to go if just starting out. A few follow up questions that you might be able to answer.
If you already purchased the machines can you still add them to the sole prop if it is created after the date of purchase? And still used for tax write offs?
Can you write off electric? If so and mining at home how does that work, can you just calculate watts that are being used by machine from specs and uses whatever your cost per kWh is or do you need to actually look at each monthly utility bill and keep track per machine watt usage?
This is the classic “it depends” answer. There is no one single answer for one situation, let alone as a general approach. You need to speak with a lawyer and accountant after giving them lots of inputs to determine the best way to proceed.
That said, depending on your state’s laws, there’s usually not much disadvantage to using LLC. Taxes flow through and there isn’t much administration to maintain the entity.
I cannot answer this with 100% certainty, if you have a CPA or a person who does your taxes I would consult them.
Yes you can. In the states you take the sqft of the office space of your machines and/or office for that floor and take that percentage of that and that amount is used as a tax write off for:
electric
internet
cell phone - “if used for buisness like talking on Voskcointalk or buying machines ect”
I think you can also write off the precise amount your machine uses for how much per KWH it uses a year.
General business rule of thumb, Corp is not terribly worth it till you are pulling down over 30k a year. after that start thinking S corp. You would only use an LLC if you had partners, and thier actions can reflect on the business. Think lawyers, doctors, and so forth.
If mining alone, no Llc needed. S corp tax benefits only come into play when you are turning 300k+ per year- otherwise it’s a big hassle due to board member meetings, meeting minutes, accounting process, documentation requirements etc. Get an accountant involved that knows crypto investing, hopefully mining also, that is local to you through a Google search. If you buy miners with your money or crypto profit that is a business cost which you will write off- P & L statement thus eliminating that income/ long or short term gains making them non taxable. You do not need an Llc or formal business entity to write off business costs. Llc is for lawsuit protection and s corp is for higher profit tax benefits. Roll all profits back into mining equipment to erase income/profits until you are ready to start paying yourself.
I sold all of my doge, bought mining equipment with all of the money and then some. This effectively erases my short term gains and the extra spent from our day job earnings will be used to reduce our AGI further resulting in my wife and I paying less in income taxes than we did last year.
2021 and 2022 you can 100% depreciate computer equipment the day it goes into service, therefore purchasing a 10k, 20k etc asic is an immediate corresponding tax write off for individual business. Biden is messing with this and the 1st year write offs will begin to taper down starting in 2023. Scale as aggressively as possible in 2022.
Good feedback! @BlockSwift. Correct me if I’m wrong but there is a cap or limit you can 100% wrote off for depreciation on equipment and if it is over that limit then the remaining goes onto the next tax year? I remember hearing something about that. All though I’m sure I’ll learn a lot more when I actually go into filing these taxes with my cpa.