Topic: Taxes and mining (Read 658 times)

I agree, it's a ridiculous, unnatural law. According to the government when you're mining you're running a business. When the coins get into your wallet you owe taxes at going rate and should report income. If the coins drop in value the next day, you have to report a loss on your investment and can potentially get get a tax return on that loss (at least in the EU you can). So, they are taking money from you hoping that you will make more money this year and keep paying, and if you don't you'll have to fill all those forms and requests, so that they'll give you back some of it.  

That's true. The taxes are not paid in BTC, they are paid in fiat, so you should only paid after selling your coins. How can you owe USD to the government if all you have is BTC, that you're not willing to convert to fiat for some reason? Somebody should point out to them that by doing this they're forcing you to sell your assets to pay tax, which can result in a financial loss and possibly bankruptcy. Either they tax crypto with the ability to pay in crypto or they only tax selling for fiat.

Can you provide links where you read this information?

Actually it's more like this...

The US sees it as money falling into your lap, as if you did it for free. That is because it is treated as property. Think of it like this, you "inherited" Bitcoin from your uncle when he passed away. But your uncle is a miner.

They are not recognizing that you've paid taxes on everything that allowed you to mine. And if you didn't it was probably subsidized by taxes. Yet. They do not recognize the POW required, either.

Your analogies do work. So you can see how absurd it is...




There are actually funny clauses. Technically if you don't regularly and substantially (the law's words) produce bitcoins you don't fall under the law. No one with a "hobby" fits under the law, legally. However this clearly doesn't make any sense given that there's no reason to turn off a bitcoin miner. And there is no definition of what "substantially" really means; but it would be clear if you lived off of it instead of another source of income it would be considered substantial.

Here's an analogy I will make: If I make a substantial omelet every morning single morning, do I own tax on the going rate of $12 at a breakfast restaurant?



I recommend you don't pay taxes. Frankly I cannot condone paying taxes on any crypto until the conversion to fiat. I am not saying what I suggest is defacto legal. The problem is while you could probably win in court, you can't afford to fight the battle in court. The future is unwritten in this realm. For countless reasons it's not practical at all to impose these taxes. Examples are: embedded forms of mining & fractions of unmovable amounts; the US will be crippled in financial structures by being out-competed, the state has no real purview over something that is decentralized globally & offers no basic rights for the, etc!

You can always choose to record your mining for future implications. But as you know this is basically insane as well, trying to keep track of tiny fragments of stuff.

The difference which you speak of is cash accounting vs accrual accounting. Accrual accounting is what is established process now.


In these examples, taxes will be due only when the fishes / crops are actually sold. The value of fish caught or the pecan trees grown is subject to debate. In the case of Bitcoin, since it is a monetary asset, I feel it is different. If you had taken the fish to a marketplace and got an IOU from a buyer, taxes would be due irrespective of when you encashed the IOU.

Maybe an accountant can explain it better....

I have read through some threads and the consensus seems to be if you mine coins you owe tax on the value of the coin the day they were mined. Then if you later sell them for USD you owe taxes on the gain if they went up from your basis.

I don't fully understand this. Does a commercial fisherman pay taxes on a fish when he catches it or when he sells it? Does a farmer pay taxes when his crop grows or when he sells it? Heck we planted 20 pecan trees at our house. When they grow to about ten feet tall they can be sold for a around 1k each. Do I owe taxes for growing them?

I can't wrap my head around the taxation just for mining a coin. Seems it would only be a taxable event if you convert it to Fiat or spend it.