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Author Topic: How to treat Bitcoin mining income for tax purposes?  (Read 14705 times)
Boussac
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January 29, 2012, 09:48:49 PM
 #41

I posted in this thread which is more general (not focusing only on mining income): https://bitcointalk.org/index.php?topic=54645.20
It seems that in Europe, bitcoins earned thru mining coud be subject to an 8% tax on the amount sold (if and when they are sold for euros or dollars).
That's assuming bitcoins are treated as a digital commodity (like say prime numbers) similar to gold because of their limited supply (unlike prime numbers).
Bitcoins cannot be treated as securities imho because there is no identifiable issuer.

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sunnankar
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February 09, 2012, 03:59:42 AM
 #42

You have obviously thought about this and have reached a defendable position. I do not disagree with your decision; in fact, it is refreshing to see people who have put serious thought into the issues and reached their own conclusions, whatever they may be!

If there is one thing this discussion makes clear, is that there are many ways of interpreting the same bitcoin concepts.

There are actually a multiple legally defenseable positions that can be taken. Perhaps you should consider picking up a copy of A Lawyer's Take On BitCoins and Taxes; a 34 page report with about 60 legal footnotes by a CA attorney. It will at least give you a good overview of the legal landscape in this area.

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February 19, 2012, 08:25:41 AM
 #43

the joint, any news from your accountant? I am curious about her having talked to the IRS about Bitcoin.
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February 19, 2012, 08:28:28 AM
 #44

the joint, any news from your accountant? I am curious about her having talked to the IRS about Bitcoin.

Haven't heard a thing.

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March 02, 2013, 01:24:41 AM
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the joint, any news from your accountant? I am curious about her having talked to the IRS about Bitcoin.

Haven't heard a thing.

I talked to my CPA today. He doesn't really know what to think. He is leaning towards business income/self employment income. (USA)

I don't like that at all. I was hoping for either rental income (The pools pay to rent my equipment) or short term capital gains (I'd prefer long term of course but I sell way too soon for that).

He said that if I could come up with a good way of describing using a pool as them renting my equipment then I could at least get away with rental equipment income and therefore not have to pay Social Security and Medicaid on top of income tax)

Thought? Comments?
malevolent
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March 02, 2013, 01:33:55 AM
 #46

the joint, any news from your accountant? I am curious about her having talked to the IRS about Bitcoin.
Haven't heard a thing.
I talked to my CPA today. He doesn't really know what to think. He is leaning towards business income/self employment income. (USA)

I don't like that at all. I was hoping for either rental income (The pools pay to rent my equipment) or short term capital gains (I'd prefer long term of course but I sell way too soon for that).

He said that if I could come up with a good way of describing using a pool as them renting my equipment then I could at least get away with rental equipment income and therefore not have to pay Social Security and Medicaid on top of income tax)

Thought? Comments?

I am not from US, but wouldn't you need some kind agreement or a contract with the pool operator? If you use a US pool and he is willing to spend some time to sign such an agreement (it would be preferable if were a big miner maybe?) then perhaps someone it should work? The pool pays you in BTC (not sure about the block transaction fees in your pool) for processing shares and securing the Bitcoin network (contributing to the security of the network?) - but retains a fee for to cover operational costs (if applicable).
alternatively, you can find someone who would like to rent equipment from you for mining (remember how GPUMAX worked?)

If you do manage to solve this problem let us know so others (in US) may use the info.
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March 05, 2013, 07:15:14 AM
 #47

for me bitcoin is a hobby. in Australia you can earn $50000. from a hobby before you need to declare it on your tax return. hobby's are non taxable earning.
 Wink 
jddebug
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March 05, 2013, 07:30:39 AM
 #48

for me bitcoin is a hobby. in Australia you can earn $50000. from a hobby before you need to declare it on your tax return. hobby's are non taxable earning.
 Wink 

$50k  !!!   WOW  Every business I have I would consider a hobby if  were in Australia.
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April 26, 2014, 12:09:23 AM
 #49

In the Notice from March 25, 2015, the IRS issued some pretty specific answers to FAQ on mining virtual currency:

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.

You can read additional answers here:
IRS Notice 2014-21

bitTax.com
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