Topic: Taxes Mining Bitcoins (Read 8490 times)

Great advice!  Why don't we all just disobey the law because we don't want to do something.  Fucking idiot.  Pay your taxes people, its not hard and will save you time and money in the future when you don't owe interest and penalties and possibly jail time.

Um, after the cost of the hardware itself, the electricity, and the time of having to do it, to get a very small trickle of coin I'm not reporting that on a tax form. The whole point is this is a decentralized currency that the government and IRS has no place in regulating. Don't report. Let them prove you owe something and fight for it.

In the UK if you are mining bitcoins then HMRC regards this as a trade and will charge any profits to income tax and national insurance, so presume similar will apply. They are starting to clamp down too.

Currently, Canadian regulatory authorities posit that digital currency—such as bitcoin and other cryptocurrencies—does not constitute either money or currency. In 2014, the Bank of Canada released a position paper concluding that bitcoin and other cryptocurrencies fail to meet the definition of money. In 2013, an interpretation letter released by the Canada Revenue Agency stated that bitcoin and other digital currencies were not currency for Canadian tax purposes. Instead, the Canada Revenue Agency concluded that a bitcoin was a commodity, like gold or oil. So, the tax rules concerning barter arrangements apply to bitcoin transactions. As mentioned, the Canada Revenue Agency treats bitcoin—and digital currencies generally—as a commodity for income-tax purposes. As a result, bitcoin transactions are subject to the same rules as barter transactions—that is, transactions where one commodity is exchanged for another.

Generally, this means that a gain or loss from a bitcoin transaction will be treated as either (i) income or loss from business or property or (ii) a capital gain or loss. The difference comes with important tax implications. The full amount of business or property income is taxable, while only one-half of a capital gain is taxable. On the flip side, while only one-half of capital losses are deductible, one may fully deduct losses associated with business or investment activity.

According to the IRS, when a taxpayer successfully “mines” Bitcoins and has earnings from that activity whether in the form of Bitcoins or any other form, he or she must include it in his gross income after determining the fair market dollar value of the virtual currency as of the day he received it. If a bitcoin miner is self-employed, his or her gross earnings minus allowable tax deductions are also subject to the self-employment tax.

Could you explain this? What should I do when I buy a meal in a restaurant for Bitcoin? Should I take the check to the tax office and pay the tax?
I would expect the authorities to demand people pay taxes from Bitcoins they're holding ahd report the gains every year. This way if they decide to spend their coins there won't be any misunderstandings. If you weren't asked to pay taxes every year you could later buy a large number of cheap products like beer cans and hide the purchase never having to report the transaction.

First most of government and politicians do not know about bitcoin and it's technology. Every bitcoin related earnings will be considered as service oriented earning only. And most of the government gives a 15 percent taxation on the bitcoin earning when you want to exchange it as a fiat currency.
If you cross the earning tax payers limit means we have to pay tax for all the earnings you are making from bitcoin or other crypto earnings.

I don't think there are any tax laws on bitcoin mining. However, in the United States, the tax law only applies when you buy, sell or spend bitcoin on a tangible commodity.

At least in Europe your house doesn't get raided and your computer confiscated if you don't. Sure you have to pay taxes and a stupid VAT, but I'd rather live here than in the US where the authorities can steal your stuff and put you in jail with murderers and rapists for selling Bitcoins.


Mining isn't taxed but income from it is. You don't have to report mining, unless you have a mining business and keeping books, but if you exchange the coins and get fiat you are supposed to pay income tax.

As far as I know, the mining is not taxed or something has changed. When you deduce that it is possible and that a rarity. What taxes do you mean, in my country all this is free.

It totally balls down on the location just as you have said. I have been mining for a while and apart from the tax I had to pay alongside the hardware, the electricity bill I pay, there has been no form of tax. The only way I guess I may have to end up paying tax is if my government decides to start taxing when converting to fiat while making use of the exchanges.

Well, those are capital gains and unless you report it, mostly by converting into fiat with the use of an exchange, then this is where tax comes in. Even without mining in some places and you just buy BTC, it is known that you will end up having some gains on it which means it is subject to tax. So, if you decide to mine, pay your electricity bills and leave your funds in your wallet, then tax obviously does not apply.

I don’t typically post on here, but this topic has garnered far too many ‘opinions’ instead of facts. To the OP: see the following for taxation of currency mining in the US.

Also, as mentioned by others, nearly every reputable pool will offer a downloadable spreadsheet of your data for tax and audit purposes. If they don’t - good luck.

Keep tabs on every purchase and use it as a write-off, from monthly rents to power cords. Larger items, such as your ASICs, may have to be depreciated over time (and you may want to in order to reduce future tax burdens). Typically these are on a 5 year straight line depreciation, or you can choose to do a Section 179 deduction and write off the full amount in year 1. See your CPA for all tax questions and what is best for you.

IRS Notice 2014-21, Q-9

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

Q-8:  Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?

A-8:  Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.  See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.

Q-9:  Is an individual who “mines” virtual currency as a trade or business subject to self-employment tax on the income derived from those activities?

A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self-employment income and are subject to the self-employment tax.  See Chapter 10 of Publication 334, Tax Guide for Small Business, for more information on self-employment tax and Publication 535, Business Expenses, for more information on determining whether expenses are from a business activity carried on to make a profit.

Bzzt -- wrong.
If your state requires you to pay sales tax on items purchased by phone/mail/online and the retailer does not collect and process the tax then YES we are supposed to report the purchase and pay the tax when ya file yearly state/fed taxes.

Catch is the state finding out. If your purchase requires no customs duty to be paid (under $2500), no problem. Pay duty (FedEx/UPS/DHL will let you know when/how much it is) and CBP reports the purchase to the state where miner is shipped. 3x times in the past Michigan sent me Tax-due discovery letters for miner purchases the previous year that went over the duty-free limit. In each case including late-fee totaled around $190 due.

From a business standpoint Customs duty and any taxes paid to get a miner are simple business deductions so becomes a moot point. For tax purposes what matters is the value of the equipment in USD at time of purchase.

it seems if we do hardware import with bitcoin payment system. this will not be taxed. because basically we do not transactions through transactions involving taxation ,, we will only pay the shipping cost of goods without the need to think about paying the state tax.

Without question the best thing to do is to go to a tax attorney, follow his recommendation and use him to file your taxes. He has a relationship with the IRS (assuming the US here) and while the IRS may ask for additional monies you may very well not be hit with fees and interest. 

The above is speculative because there isn't an objective legal history regarding crypto.  You would have shown good intention and follow through by hiring an attorney and following the guidelines, and if your books are clear and above board then you have covered yourself as best as possible.

And that is how it should really be which I still expect that is how it is going to keep being in the long run.
There is no way you are not going to at least at some point convert to fiat or make use of it to purchase some property and this is where the tax comes in.

Anything outside that is obviously not going to be taxable not like it is going to be easy monitoring every wallet to tax each and everyone in the first place.

None of government will comes into the bitcoin and try regulize it until you are making conversation of bitcoin into Fiat cash via using banking.
In that time auto you have to show the source of income to have the current account in your bank. So automatically you will show the tax files up. Please keep check in your country whether they have the taxes on bitcoin or not.

Even if government would decide to impose taxes on miners they wont really have an idea on how much % they would ask and they wont really know for sure since its not still converted to fiat which means I do agree that it would still need to be converted first before it would really need to pay up the obligations. Mining operation specially do have large scale ones do really have serious profits which government would really keep an eye on it.

Transcation charges only for convert bitcoin into FIAT  it's a digital currency system only for online transaction So direct taxes not applicable.You no need to pay tax for the bitcoin you have with you.You can use bitcoin as a tax free one.

Yeah, so far, that is the only way and which is absolutely normal. As long as you keep making use of fiat and you are making profit on whatever you are doing even if it is by keeping your funds in your wallet, then tax is compulsory. Although, this differs in so many places but with the governments regulating the exchanges now, this is something that cannot be discarded. Anything asides conversion to fiat is not even possible.

But were they not thinking about banning mining in China just last month along with all the things that happened to the exchanges over 2 months ago, I can't see them just asking you to pay the electricity bill.
Unless you are hiding the fact you are mining when the tax man cometh.

Also in my country doesn't yet implemented taxes for mining a bitcoin and for having anyone a bitcoin throughout the country. I think having taxes may be authorized by the government or any sector in the government. I would say that the bitcoin is decentralized crypto currency that only lives in cyberworld and the government cannot interrupt the mining and anyone having a bitcoin.

Lol yeah. Pretty sure he talks to his siblings. Maybe do a quick google champ. Kyle Kemper.

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Mining is income. Declare it if you want. If you're being all legal you'll have to say how much it was worth on the date you mined it in CAD. Good luck with that!

I really wonder as I really do not see how they want to know the wallet you are making use of to mine. Like you said, I guess we have to see how this whole thing will end up working out. One thing I am sure of is that there is no way they can start tracking the funds in wallets, when I can even always change my address at any time without problem.

Where the main taxing will come into play is when one is using an exchange to convert to fiat which is why governments are now making exchanges to be tax compliant.

Our country has still not come put with clear guidelines as to how to tax the income earned from bitcoin or gains from the btc. But considering the normal income form business or from profession it has to be treated in a similar way like income earned and pay your taxes as per the category one fits into. Same goes with mining the btc whatever difference earned (Sale - Cost) if positive taxes are applicable as per tax slabs.

This fact you are saying is quite interesting.
But does it also apply to exchanges when you put those mined bitcoin on them as well?
Without withdrawing them into a bank account of course but for just trading within the exchange.

It turns out that mining is taxed
what about your fee?
whether the fee includes tax

I think mining profit taxes should be computed the same as other income. Bitcoin income should only be computed once you converted it to your fiat currency and all your expenses to get that coin should be deducted first. How don't know how your country do it.

As a Canadian living in Ontario, I have been mining bitcoins and altcoins for quite a while and don't pay imposes on the bitcoin that I mined. In any case, that is for the most part since I don't offer.

In any case, from what I heard, on the off chance that you are a business and acknowledge bitcoin, you need to report it. In the event that you mined bitcoin and sold it, it considers capital pick up.

i suggest researching if have a government regulation about mining in the said country because here in my country mining have nope taxes but the electricity power fees is very expensive, payment with expensive electricty i think is enough to pay taxes including in the electricity bill.

Won't open new thread and I'll ask here too:
If I have big mining datacenter and I am officially registered, do I have to pay % from mining in country where bitcoin isn't considered as currency? Of course I have to pay electricity fees but..... Imagine it's hosting and I host websites but of course I don't pay fees of their earning from ads. So now imagine it on mining farm. If I mine ether, monero or etc with card, do I have to pay fees to goverment? Because some companies have render centers and how is the situation, can't understand.

Not only this if you want to convert the bitcoin in the huge numbers you should show the income way to have the current accounts in your bank that is how the every country government follows with their banks.
I have tried to have the bank account especially for the trading and mining only but asked me file the taxes and askes to create the current account in such way.

Taxes in the bitcoin are computing the taxes once convert into income policies ,Canada and USA are the against to bitcoin mining and other crypto related activities .it's ruling are that bitcoin mined does until that bitcoin cash value of the amount of bitcoin you spend , mining and activities apart from you pay on power supply in bitcoin activities.

Well I was studying the tax policies of Canada and the USA against bitcoin mining and other crypto related activities and I stumbled into the mind blowing fact that the both countries has a friendly law towards bitcoin like in the USA. IRS rulings are that Bitcoin mined does not become taxable untill you either sell it for cash or spend it on tangible property at which point it becomes taxable at the cash value of the amount of Bitcoin you spent.
And in Canada they possibly don't have any law on tax against bitcoin mining and activities apart from the bills you pay on power supply in carrying out your bitcoin activities.

Irrelevant. I think It is when you trade for FIAT. They can't really track your wallet earnings, as this is truly private in nature, but i'm sure they will know sold currency on Coinbase (for example). Could be 1099-MISC or something. We shall see.

I Think taxes can only be computed once you converted your income to your
local currency less the expenses you had for your operation.

Taxes for your income from bitcoin mining should only be computed once you sold your coins for a fiat currency. But government should also compute your expenses first before taxing your income. And also tax should be computed on the amount that you farmed the coin not on how much you sold it.

 Won't fly with the IRS, I'm 99.99% sure they count cryptocoin miners as "computer equipment" (which they are per most definitions) and require you to use THAT insanely long (even for REAL computers) depreciation timeframe.

Mining is a one process of bitcoin system and it's a transaction process like selling and buying are the work in this and to the bitcoin mining tax is not bad because it's going to government  so this are taxes mining Bitcoins.

What sort of depreciation models are you guys using for your miners?  When I first started I came up with an exponential formula to depreciate each miner monthly by 10% each month from it's previous month NBV rounded up to the nearest $25.  This would make each miner fully depreciated around 2 years which I figure is close to the working life of a miner.  I was also trying to find a balance between difficulty and BTC price, but since I came up with that formula the BTC price has exploded so I'm thinking of possibly changing me deprecation model and interested in what other are doing.

Don't make life so hard on yourself buddy.  In Coinbase just go to Tools->Reports  then create either a transaction history or cost basis for taxes report.  Report is well laid out and clearly shows all you've done in your account.

Certainly bitcoin taxation is unlikely. Because mining is not acceptable to governments, it can not be taxed. Bitcoin mining is a very profitable mining industry in the world.

In regards to Canada, they're going after employee discounts given by employers. If they're going after nickels and dimes, how thirsty will they be for bitcoin mining?

 Tariffs vary widely - and in many cases on specific items being imported into strong "Free Trade" countries IS in fact zero.

Probably best to keep your opinions to yourself when you have no idea what your talking about. Helps to not spread false information that makes you look stupid. I believe i found issues with every single sentence you wrote.

Taxes on importing those hardware are inevitable since tariffs are always assessed on goods entering every country specially if the price of it is quite high. Income taxes from bitcoin mining operation is quite hard to compute. I don't think there are already countries who gave the exact formula on how to compute taxes from it. Things that should be considered are, the expense that you had for mining the coin. Where are they going to base the income that you got from mining since the transactions are somehow anonymous how can they get a record of the exact number of coins that was mined by the farm.

There is also some discussion now about trading for altcoins not meeting a like kind exchange rules.  The IRS has not ruled one way or another, so technically the correct way would be if you traded those bitcoin for ethereum, it would be like you sold the coins for cash and creates a taxable event.

State and local do not necessarily have to follow IRS rulings, but they generally do.  What you mainly need to watch out for is depreciation on mining equipment (many states do not conform to federal bonus or 179 standards) and gain/loss on sale of equipment.  I have not heard of a state not following the rules of when bitcoin becomes a taxable event, but always consult your local code or a tax professional familiar with your area.

In the USA the IRS defines income as occurring as soon as you have a *right* to collect the income, not when it is received.  Deteemining when that occurs with different payout methods and pools (e.g. nanopool doesn't really show a list of rewards, only a growing number and a list of payouts) is proving problematic.

Anyone have real knowledge, not opinion?

Bitcoin's price is gradualy going up and the income of the people who mine it as well, and obviously in the countries where goverments are actually keeping an eye on the bitcoin know how much poeple make from it without paying taxes, so eventualy they will either make electric cost for the ones who mine bitcoin a bit more, or they make them pay taxes, imagine an unmployeed person who is making like thaousands of dollars without paying any taxes.

 Because the government wants all the money it can get away with grabbing - and sometimes MORE than it is legally owed.

Along the lines here: Got 2 tax bills from my state today. One is for Sales-Tax due ($149) on 2 s9's I got in 2016 and 1 for a tax-due adjustment ref 2013 for $197.

The Sales tax I understand - if the import value exceeds $2500 and CBP requires duty to be paid (was like $49) then the broker (UPS) tells your state about it and if your state requires paying Sales tax on out-of-state/country purchases they get interested...

Not sure about the 2013 income adjustment bill - didn't start mining until 2014 - but cheap enough to just pay anyway

Really
If you or a company is making income by mining - or any other means - how naive/young are you that you would you be surprised that a government will not want their part of it? Rule of Life: You make money, you pay taxes on it.

Why tax when the cost is already there in the form of hardware and electricity?

Getting cheap electricity costs would be a plus value that is very helpful. Electricity is one of the biggest costs in mining, so if we can save electricity costs we will be able to lower overall mining costs. Until now there may be some countries that apply the same thing. But until now I still have not found a mine that requires to pay taxes.

In Europe you have to pay income tax.

Yes. And actually you can only be taxed if you also declare your Bitcoin earning (specifically when you sell it), if you declare it as part of your personal income in a specific quarter or year. However, most of the Bitcoin traders or miners do not declare it as it is not really regulated to their country. In the future maybe the government will become strict on declaring this. They might even impose a special tax for Bitcoin activities. This is because the government  will not let itself get behind with the Bitcoin success and money return.

As a Canadian living in Ontario, I have been mining bitcoins and altcoins for some time and do not pay taxes on the bitcoin that I mined. But that's mainly because I don't sell.
However, from what I heard, if you are a business and accept bitcoin, you have to report it. If you mined bitcoin and sold it, it counts as capital gain.

I am keeping the transaction emails from coinbase when mining deposits hit my account and using that as the cost basis for each mining payment.    Not perfect but it will work.

My understanding is that since the process is a bit immature, the IRS is using some discretion with how people calculate their cost basis / fair market value, but they'll expect you to be consistent.  I.e. if you cant cherry pick exchange rates from different exchanges or times to help you setup a better cost basis. My advice would be to start a very thorough spreadsheet to track your income if you plan on making more than a grand per year.

https://www.irs.gov/newsroom/irs-virtual-currency-guidance

Yes it is, and it exposes you to paying taxes on earnings that no longer exist if bitcoin goes down. 

Judging by the recent lawsuits against Coinbase, it seems that the IRS is very interested in auditing bitcoin miners.  I would get your numbers in order...

It is the good luck of yours that you are living in Canada where the electricity is so cheap and I think mining will more profitable in your country as compare to other countries so keep you job continue to get more and more profit from it .

 They seem to have radically changed their position since the last I saw.
 This ruling makes dealing with mining income a NIGHTMARE - how the heck do you know which date you "mined those coins" on and WHICH price during that date are you supposed to use?

 I know that the IRS is a bureaucracy and loves their paperwork, but this is INSANE even by their standards.

in my country also not taxed in mined bitcoin, which I know mined bitcoin indeed there is no taxation regulation about it. but we will be charged when selling the bitcoin.

This in a nutshell .
There is no taxation on bitcoin only the transaction costs.The bitcoin mining is fully anonymous no government can intrude here,you don't need to worry about taxes.The hardware needed for mining is just powerful system so yiu just have to pay the costs for transportation.Maybe in future there might be taxes on bitcoin if someone regulate it.

There is no taxation on bitcoin only the transaction costs.The bitcoin mining is fully anonymous no government can intrude here,you don't need to worry about taxes.The hardware needed for mining is just powerful system so yiu just have to pay the costs for transportation.Maybe in future there might be taxes on bitcoin if someone regulate it.

There is local taxes only for using bitcoins and there is no information that IRS regulated taxes on bitcoin mining separately. We don't need to pay anything apart from that. US government treated bitcoin and other digital currency as a property for US federal tax purposes bro.
Adam Bergman is a tax partner with IRA Financial Group and president of IRA Financial Trust Company. Contact them more information.

https://en.bitcoin.it/wiki/Tax_compliance#U.S.
"The IRS also clarified that mining is treated as immediate income at the fair or market value of those mined coins on their date of receipt."

But as the page mentions below, how is the value of Altcoins supposed to be determined when there aren't direct alt/FIAT pairs in exchanges?
This whole IRS & mining seems like a grey area to me. Just pay your capital gains taxes when converting to USD.

Im glad to live in Canada because our retarded Justin Trudeau doesnt even know what is bitcoin and we have not, or few, laws concerning cryptocurrencies.

Plus, canada has.cheap electricity. Thats why im trading and investing all my profiits into mining.

Quint can you cite this ruling?

The last position I saw the IRS taking was that you were required to recognize mined bitcoin as income when it was generated and then take a capital gain / loss when selling.

Can't speak to Canada.

 In the USA, IRS rulings are that Bitcoin mined does not become taxable 'till you either sell it for cash or spend it on "tangible property" at which point it becomes taxable at the cash value of the amount of Bitcoin you spent.

 There's a lot more verbage involved, but that's the short-form basic information you need.

 I suspect state and local income taxes (where applicable) have to follow the IRS rulings on the subject.

Somebody can help me about the taxes mining Bitcoins in Canada and USA. Taxes to import the hardware, income tax,  etc.