[U.S. miners] How to defer taxes on your earned coins

[Coinfarm ventures]

As you know, the evil, ugly IRS considers mining revenue 'income' the moment it arrives in our wallets. However, I found a trick to roll the crypto into a retirement plan and therefore get a tax benefit.

Step 1: Incorporate your mining operation as an LLC, if you didn't do so already
Step 2: You must earn a net profit after power cost & depreciation!
Step 3: Open a Solo 401(k) retirement plan for the company. There are services that make this very simple. They will register a trust fund entity on your behalf and appoint you as the trustee & plan custodian.
Step 4: Open a new corporate exchange account on Kraken/Gemini/Coinbase Pro in the name of the trust.
Step 5: Send your mined crypto to the exchange. Sell the crypto for cash, transfer the cash to the trust bank account, then transfer the cash to the exchange.
Step 5.5: Buy whatever crypto you want on the exchange.
Step 6: You just made a 401(k) contribution which is either on a pre-tax or Roth basis! If you chose pre-tax, it's like buying 20-30% more coins. If you chose Roth, you'll never owe any future tax on withdrawals.
Step 7 (optional): Send the coins on the exchange to your own hardware wallet.

Solo 401(k) accounts allow you to invest in almost any asset. The other benefit of this type of account is a high $60k contribution limit, the ability to borrow up to 50% or $50k at zero interest, and rolling over existing retirement accounts into buying tax-advantaged Bitcoins while the price is still low.

Of course, please consult with an accountant or attorney to make sure you're doing this correctly. Mistakes will be expensive. The maintenance / transaction fees can be $1000/year or so as well.

I have just started this experiment today. The process should be complete this month.

[philipma1957]

As you know, the evil, ugly IRS considers mining revenue 'income' the moment it arrives in our wallets. However, I found a trick to roll the crypto into a retirement plan and therefore get a tax benefit.

Step 1: Incorporate your mining operation as an LLC, if you didn't do so already
Step 2: You must earn a net profit after power cost & depreciation!
Step 3: Open a Solo 401(k) retirement plan for the company. There are services that make this very simple. They will register a trust fund entity on your behalf and appoint you as the trustee & plan custodian.
Step 4: Open a new corporate exchange account on Kraken/Gemini/Coinbase Pro in the name of the trust.
Step 5: Send your mined crypto to the exchange.
Step 6: You just made a 401(k) contribution which is either on a pre-tax or Roth basis! If you chose pre-tax, it's like buying 20-30% more coins. If you chose Roth, you'll never owe any future tax on the growth.

I think it's even possible to store the crypto in a hardware wallet instead of on an exchange. Solo 401(k) accounts allow you to invest in almost any asset.

The other benefit of this type of account is a high $60k contribution limit, the ability to borrow up to 50% at zero interest, and rolling over existing retirement accounts into buying tax-advantaged Bitcoins while the price is $28k.

Of course, please consult with an accountant or attorney to make sure you're doing this correctly. Mistakes will be expensive. The maintenance / transaction fees can be $1000/year or so as well.

I have just started this experiment today. The process should be complete this month.

I am meeting with an accountant on June 9th

We formalized the company this year.

We have an LLC my partner is 45 I am 65

The joint venture we do with 2 other guys they are 25 and 58 they have an LLC

We will be looking into this.

Oh you are now at 100 points which is a new level Full member once you get the activity in. A few weeks of posting will get you to activity of 120

Rank_________   Required activity   Required merit
Brand new----   0----------------------   0
Newbie-----   1------------------   0
Jr Member-   30----------------   1
Member----   60----------------   10

Full Member   120--------------   100

Sr. Member   240--------------   250
Hero Member   480---------------   500
Legendary   Random in the range 775-1030   1000

[Coinfarm ventures]

We will be looking into this.

I forgot to mention that I realized sending crypto to the trust as a 'contribution' is not allowed. You need an alternate way of putting it into the Solo 401(k), like selling it on an exchange, then contributing the cash to the Solo(k); or putting the cash in a new Traditional IRA, then rolling that over into the Solo(k).

Every single contribution, loan or withdrawal must be in the form of fiat. This means if you want to take a loan/withdrawal, the trust needs to have enough liquid assets (stocks, bonds, crypto, cash).

I'm happy with the provider I chose so far. They handle all the paperwork, IRS filings, etc. for a flat $49/month fee. All I had to do is sign a few papers that they prepared, open a bank account, open an E-trade account, then open a Kraken account. No transaction fees. I can PM you my referral code if you like.

The beauty of a Solo 401(k) is that it's truly 'solo', which means you can invest in whatever you like while your business partner can choose their own investments. So I can see it working for your situation. Whenever you think ASIC or GPU prices are too high, or a bear market is coming, you can contribute your share of profits to the Solo(k). No need to buy more equipment if you want a tax deduction.

Oh you are now at 100 points which is a new level Full member once you get the activity in. A few weeks of posting will get you to activity of 120

I appreciate the advice I've received from you as well as the other long-time miners. It saved me thousands of dollars. Thank god I cancelled my plan to open an ASIC mining warehouse in Texas. I would've been in deep trouble by now, with customers quitting in the beginning. It would've been a repeat of my failed 2018 ETH warehouse.

Instead I'm developing this Stratum software that can distribute hashrate among many customers, switch pools, boost revenue with profit switching, etc.