im lost
say i mined 10 Bitcoins over 1 year. i did not sell any. i accumulated extra $200 per month in electricity than normal. i also paid say $3,000 for my mining gear. what do i report/deduct for my taxes?
the only thing i understand is that while i created 10 bitcoins out of thin air, i did not sell it for cash, so i do not report capital gains. but can i still claim a deduction to my expenses such as the electrcity, mining gear, and the depreciation?
I don't think you can deduct personally. It must be a business. And yes no gains, just like unsold inventory.
My understanding is that it is considered a hobby at the level you describe, and therefor you cant deduct beyond the amount you sell. if it cost you $4000 for the year to mine, and you sold $4500 worth, then you could subtract the cost from the income and pay taxes on the $500. Since you did not "sell" any of the product of your hobby, you don't have anything to deduct the expenses from. Anything left in bitcoin wouldn't show up on your taxes this year. If you sell a bitcoin 2 years from now, there may be more clear regulations, or you may have to do it as a capitol gains where you paid $0 for the asset, then sold it for $100,000.
I am not a tax accountant or lawyer, but this is how I'm handling my mining and selling of my bitcoins until more specific laws are revealed.
