Bitcoin Forum

Hey guys Tell me are there people here who declare regarding there mining profit?
I understand that you " need " to pay tax for the profit from mining
can anyone answer or someone who know something regarding this subject?

Thanks

Law is not the same in every part of the world. This is a country specific question.
It also depends on the amount of Bitcoins you're mining. If it's a hobby that brings you $100 a month nobody should care.

You want to tell me that there is country that I will not need to pay tax?
and no I am looking to invest We purchase already 100 Mainer and we are looking the tax subject right now

In the US:

Mining income is taxed as ordinary income at the price on the day and at the time you mine the coins.

Profit/Loss while trading is taxed as a capital gain or loss.

I have paid the income tax on all the coins I have mined and the capital gains tax on all of my trading.

Of course, there's a reason some countries are called tax havens, although I'm not an expert and wouldn't want you to have problems with the law in your country.
In some countries if you keep an investment for a certain period like 2 years, you are not taxed or have to pay a very low tax, so that's something to consider. In some countries, like Australia, you have to pay VAT with every transaction.
Do your own research.

Ok, let's say I mine 3 blocks each worth the standard subsidy plus the income in fees of let's say 1BTC per block. It means 13.5BTC of income per block and thus 40.5BTC in total.

I understand that officially you pay tax over the value at the moment you mined the coins, but does selling them at higher value at some later point require you to once again pay tax?

It could more or less fit in the category of trading/capital gains.

Correct.

First you would pay the tax on your income/profit during mining.  In your example you would pay tax on:

  [(40.5 BTC) x (the price at the time mined)] - (all expenses of mining including equipment depreciation)

Then when you sold them at a higher price you would need to pay taxes on the capital gains:

  (40.5 BTC) x [(price at the time of sale) - (the price at the time you mined them)]

Thanks for confirming. I must admit, you'll probably fit in the category of far minorities that are honest about everything they make through mining and profit through trading.

I personally would not walk that exact same path as you do. Mainly because of the fact that I refrain from being used as a money tree by my local government.

I pay enough tax over everything that isn't Bitcoin related already, so why would I pay another load of taxes over my holdings and profits in Bitcoin? It doesn't make sense for me, and never will.

I think every country has different regulation on taxes and other, if in my country until now there has been no government regulation mentioning tax payment about ownership or income obtained from bitcoin business either through trading mining or investment

by your words it seems that you need to pay whatever you are going to exchange your coins or not?

this seems absurd, i was under the impression that as long you don't exchange you don't need to claim your capital, at best you need to declare the consumption, which in fact was payed with fiat

but if i pay in bitcoin my bills i should be fine with no tax, as long as i keep everything in bitcoin, with altcoin would even be more worse...

I never had any mining profit as I am not in the mining but I pay tax for the transactions of conversion of bitcoin to fiat currency. I use a service and they charge 15% tax on transaction fees (aka mining fees) and it is different from the service charge levied by the service provider.

I usually use localbitcoins for smaller amounts (there is no tax as payment is sent directly from individual) and unocoin for larger amounts (where tax is charged on the transaction fees).

If people had to pay taxes only when you exchange your goods (or bitcoins) for fiat, then most people will find ways to avoid taxes. Just stick to barter transactions, and you have to pay absolutely no taxes!
I hope that clarifies why you have to pay taxes if mining is profitable, whether you sell the bitcoins or not.

In the US even barter transactions are taxable.  However I expect most people do not fill out the form used to report taxes on barter transactions.  Also it is very difficult to calculate the tax.  If I give you one of my apples for one of your oranges then how much tax to we each owe?

The answer to the above question about mining income is yes, if your mining was profitable then you are required to pay tax on the profit even if you keep every single Bitcoin you make from mining and do not spend a single satoshi. 

By IRS rules you would need to do the following:

• Keep a ledger showing every transaction that delivers mined Bitcoins to you.
  
• Note the date, the amount of Bitcoins you receive and the price of Bitcoins on that date (use can use the average price over 24 hours).
  
• At the end of the year you add up all of the USD you would have received if you had immediately sold all of the mined Bitcoins as soon as you had received them (even though you did not spend a single one).
  
• That is our income from mining for the year
  
• You can now deduct your expenses
  
• You can deduct the cost of the electricity used to produce the Bitcoins, of if you live in your mother's basement and did not pay for the electricity then you have no electricity cost to deduct
  
• You did buy the Bitcoin mining equipment so you can deduct the allowed depreciation value of the equipment (using section 179 you can deduct the entire cost of the equipment the first year but then you have nothing to deduct for all the income you get in any subsequent years)
  

When you go to spend the Bitcoins you mined or exchange them for USD then the cost basis for your capital gains tax on the coins is the amount you claimed as income in the above process for each lot of coins mined.

When it comes to tax issues the law is dicey in most countries as there is no specific law yet to take care of income such as this. In my country for example, if I have a mining farm not too big to attract attention, I can avoid paying tax simply because of the way our financial system is as at the moment but this is not universal.

When you are now looking at the tax implications, this is something that should have been done even before the acquisition of equipment that should be part of your feasibility study, what if the law in your locality frowns at things like this and the tax could eventually kill the business, that means that all the investment have gone down the drain.

I was actually agreeing with you and stating that barter cannot be used to avoid taxes.
Most countries have the concept of 'deemed' transactions - 'deemed sale', 'deemed dividends', etc. to make sure that you cannot avoid taxes.

how can they know how many coins you are holding? the beauty of bitcoin is that someone can hold millions of $ worth in bitcoin without anyone else knowing about their existence

there is no way for the IRS to know how many you generate via mining it's simply impossible, you can go ahead and claim the false or declare only 10%

Of course you can always lie to the IRS and pay less in taxes than you should according to their regulations.

If you do not get caught then all is well - you are a winner!

If you get caught then you lose and you face:

  Paying the taxes anyway
  Paying interest on all the taxes you did not pay
  Paying huge fines
  Going to jail for tax evasion

This is true whether you hide income and capital gains using gold, Bitcoin, good old fashioned US dollars or any other means.

No taxes are imposed from mining in third world countries, all profits need not be reported to the government because there is no law governing them. But personally I do not mind the income tax from this because the profits are more than enough.

This is a new class of signature spammer.  The posts mostly make sense but they only visit a thread once, dump a post close to a turd but not close enough to be reported and then move on to another thread.  Looking at the post history they spread their "opinions" over the entire system and never revisit any threads.  Very annoying.  This could be cured by eliminating all paid signature campaigns.

What happens if you don't hold the private keys to the mining address ?
 ;D

the point is that they will never know, it's more easy to hide with bitcoin, especially if you hide your coins in other altcoin, simply impossible for them to trace all that shit

with gold it's far more easy to get caught, everythign about gold or fiat is traceable, cash the same, people think that cash are anonymous, but they are not, to get cash you need an ATM which is traced

everything that run on visa or mastercard is traced

I wouldn't bet that your Bitcoin transactions are quite as hard to trace as you think. As soon as you have done a KYC verification somewhere, your info is in the system.  They can track the coins, I mean that is the point of the blockchain!

Once you get into alts they will get you by auditing exchanges.

We are lucky in Germany that if you buy and hold for 1 year, tax isn't an issue. I think tax could be what destroys bitcoin in the future, it is so complicated for businesses.

i just never expose my address in the public if i was serious about hiding my identity, i'm not now, i don't care i was just giving an example

if for example i want to purchase something i would use every time a new wallet(not a new address) that hold only a tiny fraction of my total bitcoin, those coins would come from mining not purchase on exchange

and if you mine all your income is very anonymous, esspecially with altcoin and their anon features

Hello!

There are different laws in different parts of the world so we cannot really answer the question at hand. Nonetheless, it is best to check the tax laws and internal rules and regulations of your State or place of jurisdiction to verify your concern. As we all know, tax evasion is generally a crime.

And regarding your statement that there is a 'need' to pay tax for the profit from mining, it is on a case-to-case basis. We cannot apply one rule for everybody.

I hope it helps! 

In order for the state to levy a tax on bitcoin for a start it is necessary to recognize as currency. This is no. But no currency, no tax. Regarded as your income can only inflow of foreign currency from the exchange of bitcoin to your account.

Can the government get any evidence of bitcoin minig profits?

It is good to know that we have to pay taxes in US. In some part of the world of countries where bitcoin concept is not that popular are still tax free. I hope it gets equal everywhere one day so that transferring of bitcoins will be easy from one country to another.

You're wrong. You have to pay tax from trading stocks, and these are not a currency. This is just an example, but most countries require you to pay income taxes and trading brings you income. The profits can be hidden as long as you hold your coins, but someday you'll want to buy a car or a house and then it will all be revealed.


They can if they want. At the moment I haven't heard of such cases, because connecting the mined coins with taxpayers is almost impossible, as long as they don't convert to fiat. They'd have to check each miner in a pool to see which of them send money to exchanges, then pick those who used local exchanges, the ones that can be easily forced to disclose information, and then send them subpoenas. Then they'd have to go through the history of each of these accounts to see how much money they wired and compare with their tax reports.

In my vision cryptocurrency is a uniek piec of freeware open source software. If you hold cryptocurrency then its like holding software. We do not pay for opensource freeware software. If you mine cryptocurrency in the decentralized community with your hardware then it is still your software. Not taxable in any kind if so then sue me if i make a wooden chair of my own wood and holding that chair.

If i sell that chair then its income and can undedstand taxation. Then taxes should be executed by the country where the individual lives. Al other approches i do not understand and are based on misinterpertation in my vision.

If tax authority targets you, it's a high chance that you can get caught. It's not too difficult to trace bitcoins if you have any transactions related to third parties that require you to provide any personal info (Delivery address, bank account or ID...)

If I bought some BTCs many years ago, I will need to report only at the time when I sell, right? I am in US.

If you are being taxed then pay that taxes with your rabbitcoins  8)

I believe that you are a good citizen of the land then. Maybe your country is really strict in the implementation of its tax laws and for people to avoid the inconvenience of being tag as tax evader then they just follow the law so there would be less headaches.

Here in my country, we can still get away from being taxed on our Bitcoin income and transactions. Most of the people involved in freelancing projects online are not paying the government any tax. Maybe because the government is not really serious in running after tax evaders and they just wait for anybody to declare his/her income.

It is pretty easy to avoid tax on income mining and trading etc) if you really wanted to. Its far harder to avoid coming to the tax authorities notice when you want to cash out into Fiat. Difficult to explain where all that extra money came from.  Especially as the tax authorities have the perfect record of transactions (the block chain).  I don't think tax authorities are there yet but as crypto increases in value, they will take more and more notice.

Paying taxes is not that bad at all, if that country has good government and no corrupt officials.
When our government implement taxes on my earned bitcoin I will warmly abide by it.
For we do have great leader at this moment. If the taxes will help your country to improved why not.

Conceptually you "gained property" as far as the USA is concerned. You pay tax when your property gains value. They're asking you to pay value on nothing becoming something.  ::)

IMO I think it's entirely wrong to pay taxes on that. I wouldn't. Bitcoins are out of the purview of the state no matter what they like to claim. Fact is you paid tax on everything that allowed you to mine that Bitcoin.

If a furniture maker pays taxes on his woodshop, wood, brushes, oils, etc... and makes a chair, does he pay taxes on the value of that chair coming into existence? No. Lawfully he "would pay tax" but he doesn't. No one does that. They pay sales tax when they sell it, or pay higher property taxes to compensate. If they are listed as a commercial entity they pay extra taxes like for electricity etc.

Think of it like this, they're acting as if Bitcoins fell into your lap like your pop passed away and left them to you. They want to tax on that. What they're ignoring is POW (proof of work) in which you paid plenty of tax already and have "labored" it into existence. So their argument is really faulty.

How and why are they able to say this crap? Because no one has challenged them yet. Why haven't they enforced it? Because then they wouldn't have any volunteers since it has some shit chances of holding up in court.

To clear this discussion up, we need someone to chime in who has gone through the rigamarole of doing taxes on  Cryptomining.
Paying the taxes on bitcoin you mined on XYZ date makes no sense whatsoever.

Say for instance, you mined a 1 Altcoin on 7/11/16  at a price of $500 .  A month later the price of the altcoin crashes to   $15 dollars amd doesnt recover for the  foreseeable future. The value of the alt-coin is only realized once the altcoin is converted to  Fiat or used to purchase a good. Technically the Alt-coin is a useless abstract currency until this occurs.

So the IRS expects us to pay the taxes on a mined alt-coin, before we ever realize its true worth?  This makes no sense, but, if that is the case, then miners should immediately cash  out whatever they earned, then re-convert whatever fiat  they want to re-invest in the particular coin. This would make it much easier for the miner to organize their particular taxes.

A friend of a friend recently purchased multiple  Asic miners and   he told me hes going to mine, hold, and whenever he cashes out present the earnings as capital gains. He will  put down the value of the equipment used in column E on his  Schedule D 1040 form.  I view this all as straight capital gains.  I feel thats the best thing for us miners to do, even if the  IRS balks, your not going to  jail and maybe have to pay a small fine due to the fact that this is a new field, for us and for the IRS.

Another thing that may work is, mine, hold, and hope that  your countries economy becomes like Japans, in Japan you can use Bitcoin  as a taxless currency  for goods, rent, property, cars and food.   I foresee this happening after the price  of a bitcoin starts to stabilize around 100K, which should occur toward the middle of the 2020's

     Using Bitcoin in Japan: https://youtu.be/xrauYRGDCjY (https://youtu.be/xrauYRGDCjY)

Didnt the government not recognice bitcoin as currency? Wouldnt paying taxes for bitcoin be the same as paying taxes for monopoly money?

It's probably in the country you live bitcoin not in legal.
In some countries bitcoin has been legal
And I think there is no harm in paying taxes for the welfare of the country itself.

During a discussion about trying to have favorable tax situations with cryptos a friend once said, "Don't do it, that's like inviting the Devil into your home, there's no good reason to do it if it's not already happening"

I highly recommend against filing capitol gains tax. For what reason is it wise to inject crypto mining with the state? They shouldn't be allowed in it, but if everyone lets them in then they'll think it's all ok until a Supreme Court case goes to show they have no right (it's only a matter of time).

In our country doesn't have a law regarding taxation on bitcoin. Maybe depends on the state or country because other country already legalized bitcoin. And our country is not one of them but we're open in transactions even in days.

Filing capital gains may protect you from future prosecution, for hiding your income. The state may be evil, but we all have to play by the current rules or be ready to face the consequences.

In fact, there is no problem for some tax-free countries, but it will certainly be a problem for some countries that charge a hefty sum of money. As a result, million dollars can be transferred from country to country without any registration.

People work hard and earn money which ideally they would like to retain for themselves. However, a significant portion of this usually has to be given to the state. In my view, it is right that people pay their fair share of taxes.

Money is everything in today’s livelihoods. This is because money is used to buy all the necessities such as food, water, and shelter. Money is also used to help a family’s children in the form of school fees and other activities. In addition to this, people do not only need money to cater for their necessities, but also for future investments. The more that people have to invest, the more they believe they can accumulate in the long term. As a result, many are reluctant to lose some of their income through the deduction of tax.

Nevertheless, citizens should be obliged to pay taxes to the government for a number of reasons. They should accept that the taxes they pay help the government offer them the public services all over the country. These public services are things such as the construction of roads, bridges, public hospitals, parks and other public services. The same tax money helps the country’s economy to be stable. Through taxes, the government can pay off its debts. In short, tax money is a way of ensuring that people have comfortable livelihoods.

In conclusion, even though many people think that they should not pay taxes, that money is useful to the stability of any country. Therefore, people should not avoid paying taxes as it may affect the country’s economy and services that it provides.

Bullshit.  In the US any Bitcoins you receive from mining are considered ordinary income.  So your statement is totally false.

I have paid all the taxes required on my Bitcoin mining and Bitcoin trading.  For mining you must claim the value of the Bitcoins you mined on the day you mined them.  The way I did this was to use the average price on that day as the value.  So if I mined 1 Bitcoin on a day when the average value was $10 then I have $10 in ordinary income on that day.  You do this for all Bitcoins mined and the sum is the amount of income you have and then you calculate your tax from there.  Of course you can deduct the cost of the mining equipment, electricity, etc. since you are running a mining "business".  So if the amount you spent making your coins exceeds the amount they were worth you have a loss and this loss can be taken against your income.

Nope.  On the day you mined the coin you had $500 dollars in ordinary income.  This $500 is also the cost basis for the coin.  If you sell it for $15 one year later you have a long term capital loss of $500 - $15 = $485 and you can deduct this long term loss against all your other long term gains.  If you hold it for less than a year then you have a short term capital loss of $485 and you can deduct this loss against your other short term gains.

Yes, the ordinary income from mining happens on the day you mine it.  If you don't have a lot you can wait till the end of the year and report all your income from mining on your form and pay the tax at that time.  However, if you are making a LOT of profit (income minus all your expenses) then you will have to make estimated payments throughout the year or face a penalty for not paying your taxes on time.

The amount you make from mining is ordinary income, not capital gains.  You can deduct the cost of equipment, electricity, etc. against your ordinary income.  All of this needs to be done on a schedule C - not E.

If, after mining the coins and correctly reporting their value on the day you mine them and determining the cost basis for the coins, you sell them then you have a capital gain or loss and the capital gain or loss is reported on schedule E.

Dream on.

Well I am not being taxed, as IRS does not records when I bought it at MtGox, lol.

FIFY

Uh... so you paid more taxes on actual income, and you expect them to come down on you for not paying less tax through capital gain tax?  ::)

More taxes on actual income? No - You pay the taxes which are due. Whether they are based on income or capital gains.
The state may still come after you unfairly, but at least you have done what is expected.

I will admit I am new to this and don't 100% understand all the technology and I am not advocating anything illegal but is there anyway possible for anyone to know what you mined until you actually do something with the coins? The miner doesn't require anything but an address and those can be created anonymously right?

Obviously at some point down the road when you decide to spend or exchange them you might have to explain where you got them but I don't see how it could be tracked prior to that.

Is the actual person doing the mining responsible for the mining or is it the one who controls the address that receives the fruits of the labor? What if I set up a miner here at my house in the US and pointed it to my sons address who lives in another country?

If someone has an actual farm of multiple miners I see it as a legit business and everything should be accounted for. The guy at home running nicehash on his gaming pc and turning around and using all profits to buy more games on steam not so much.

The law is the law but how many people report the income they make on a garage sale or when they bet their buddy $100 on the Super Bowl.

A huge problem I see in reporting profits and losses on small home based mining is electricity which is your biggest ongoing expense. How can you accurately differentiate how much of your electric bill is general home use and how much is due to mining. Sure you can estimate but will that hold up in an audit?

Interesting read:

http://www.businessinsider.com/how-paying-taxes-on-bitcoin-works

I would highly recommend consulting your tax accountant.

Well this is fastest transaction system as well ;) but yet there is no law exist in any country on bitcoin mining and might be possible sooner tax will implement on this business because big organization jumping in this arena and many country think about very seriously...

Guys, shoud I pay any taxes mining in Russia? Does somebody know?

Definitely that is true, because if we are payed taxes in our income in crypto currency only government who become win. Why? Because their fund was increasing without doing anything, they were collect and collect taxes for nothing. In my experience only government officials will become reach because they were abused their power and corrupt the money of many people.

In addition it's better if we used our income to improve our lifestyle in each country, also most of us are wants to become close to the rich people. So it's better if save our income in bitcoin for our own future.

I think this all depends on the country in which you live and also on the money you earn from mining . If the income is less than there will be no problem . Every country has different rules regarding the tax payment and you have to follow accordingly . There may be different followups due to legality of the bitcoin in the particular country.

question: (my gains are negligible comparatively speaking since I just began)- if I don't move crypto into USD am I still required to report gains made during trades?

The short answer is yes, you need to, but currently it is difficult to enforce. However, there may be some changes to this in the future. This paper explains some of the issues that may help guide your decision: https://scholarship.law.duke.edu/dltr/vol16/iss1/1/.

I'd say no.

If there is no government regulation in our country so far, it refers to the tax on the ownership or income derived from the transaction of mining or investment from the bitcoin business.

There are some thread that miners declare their profit but i don't think that we need to pay taxes for the mining profit. 

Thats true. every country has each government. of course each country has its own rules for this. in my own country is busy bans to use bitcoin. even this ban is already in the state law and if anyone violates it will be given sanctionsl. from it makes a chaotic market in my country. the point is there is no tax imposed in my country. even if you get a great minning income you will not be taxed dude because bitcoin is illegal in my country..

I do not declare anything right now as i didnt cash out anything outside my basic investment

In our country bitcoin or any crypto currency are no need to pay taxes, for the reasons of all digital currency in our place are not totally legal. But it is not illegal too, maybe we are in neutral because we can follow with the rules and regulations of our country to lessen the risk and illegality of crypto currency in our nation.

This is hard to tell as miners will have a very complicated tax reports if they declare their mining income because the will have 2 kinds of taxes. One is of course income tax (the money they will receive from mining) and second capital gains tax (the money they will receive from price appreciation of Bitcoin) of course declaring this is hard as if the taxing bureau will suspect you of tax fraud you will not have any evidence of proving your income through mining, you must be good in accounting or hire a good accountant in order to be clean with your taxes.

thats nice idead but i dont think that their is someone are decklaring their tax honestly in order to them to  to pay tax heartely

If it's taxed, it could be treated as legal by the government. Less chances being banned, you get to keep your coins

This has always been a topic in the legal section. But I understans why as tax is kinda complicated when it comes to Bitcoin or cryptocurrency earnings from different activities.

Anyway, here in the Philippines investments are filed under income tax that is filed and settled once in a year. It is the same with the tax of business owners, real estate agents, investors and traders of stocks and the freelance professionals who practices theie profession.

Although the income of all these people are taxable to income tax, including Bitcoin earners, a lot are not filing or some are just making up numbers for the sake of just filing. This is because it is kinda on honesty basis. And with Bitcoin being transacted anonymously, it is more hard for the government to know who should be filing. And so, a lot do not bother filing.