Taxes can be one of the most intimidating considerations about ventures in the bitcoin industry, including mining. Here are some general principles to offer a starting point in searching for answers to bitcoin mining tax questions.
Nothing in this post is meant to be financial advice nor should be construed as such. Always consult with personal tax and accounting advisors for more clarity.
Cryptocurrency taxes
Bitcoin and all “virtual currencies” are treated as property under current IRS tax law. In other words, cryptocurrency investments are subject to capital gains taxes in the same way investments in other commodities or stocks are taxed.
When bitcoin and or another cryptocurrency is sold or swapped for a different coin or token, the gains or losses from these transactions are subject to taxes based on their dollar-denominated market value at the time of selling or swapping. The original purchase price and how long the bitcoins are held factor into capital gains calculations.
Mining taxes
Cryptocurrency mining is generally taxed as income, which means miners are taxed on the money they make per amount of bitcoin they mine based on its market value when the coins are mined (a.k.a., cost basis).
Mining income is self-reported in the same manner as any self-employed individual filing taxes. This applies to all forms of mining, including income from hosted and pooled mining operations.
More information
Always consult with a legal or tax advisor for answers to more specific questions. For additional help with tax questions, several cryptocurrency tax specialists can be consulted:
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