US Mining Hardware Deduction/Depreciation

[Aureum_Coffee]

Guys in the US.

Just go and incorporate yourself as a company.  LLC, small corp, sole proprietor, doesn't matter.  Spend the  roughly $120 with the state and become a company.  You can afford it since you can afford the miners.  It gives you all sorts of tax breaks.

Miners can be computer or manufacturing equipment.  Classify it as computer, great, then you can use Section 179 accelerated depreciation schedule.  Section 179 lets you deduct a great percentage of  the miner market value.   This depreciation offsets your BTC income.  If you don't have enough BTC income in fiat terms, then it offsets your regular work income. 

With a corporate like structure, you can deduct or subtract the electricity cost, internet access cost, network and router switch cost, home cooling cost, trips to BTC convention, gas cost to meetup with your mining buddies, etc.  Basically all these cost deductions will more than offset what you made in fiat when your BTC is mined.

Only thing to watch out for is the 3 year guideline.  If you don't show a positive book profit after 3 years, then IRS can classify your mining operation as a hobby, and reduce your past deductions.  May result in back taxes.  One smart person told me, if that happens, then just close up shop (shut down the company) and stop mining.  It's not profitable anyway.  3 years is a long time in BTC land...

** Not legal advise.  Consult with your CPA or tax lawyer. Keep invoices and receipts when going the corporate route.

[1715172268]

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[1715172268]

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[1715172268]

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[1715172268]

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[Searing]

Guys in the US.

Just go and incorporate yourself as a company.  LLC, small corp, sole proprietor, doesn't matter.  Spend the  roughly $120 with the state and become a company.  You can afford it since you can afford the miners.  It gives you all sorts of tax breaks.

Miners can be computer or manufacturing equipment.  Classify it as computer, great, then you can use Section 179 accelerated depreciation schedule.  Section 179 lets you deduct a great percentage of  the miner market value.   This depreciation offsets your BTC income.  If you don't have enough BTC income in fiat terms, then it offsets your regular work income.  

With a corporate like structure, you can deduct or subtract the electricity cost, internet access cost, network and router switch cost, home cooling cost, trips to BTC convention, gas cost to meetup with your mining buddies, etc.  Basically all these cost deductions will more than offset what you made in fiat when your BTC is mined.

Only thing to watch out for is the 3 year guideline.  If you don't show a positive book profit after 3 years, then IRS can classify your mining operation as a hobby, and reduce your past deductions.  May result in back taxes.  One smart person told me, if that happens, then just close up shop (shut down the company) and stop mining.  It's not profitable anyway.  3 years is a long time in BTC land...

** Not legal advise.  Consult with your CPA or tax lawyer. Keep invoices and receipts when going the corporate route.

yep pretty much what I did (prev posts) and got a bunch of stuff for being a "new business" on startup costs .....not sure what the hell was going on actually but the above
sounds right sole proprietor home business...deductions of miner equipment etc

anyway the CPA seemed like she was having a hell of a lot of fun...tossing money back at me....so whatever...main thing I got form this is "mining' is taxed at 25% gross income...and I made 16k i should have paid 4k in taxes..because the only way I can "make* that gross income as a miner income is to have equip to do so...well...in the end I paid only 550 bucks out of that 4K on my amended tax return

er on a side note...she had me "make a profit" on last years taxes....so I'm not in the hole yet...as to the above comment you have to show a profit in 3 years...

anyway imho worth the 550 extra to amend my taxes just not to have IRS off my back if/when I may sell some coin (as per their property classification) 1 year and 1 day from when I mined it...ie this coming nov/dec

the game will likely change this year again...it is all in flux...so 2014 it likely will be completely different yet again

anyway the CPA seemed to have a good time...was much grinning and chuckling to herself

Searing
 

[KyrosKrane]

a story problem


mine 1 BTC at $400   - logged as income
Cost to mine that same 1 BTC - $490 logged as expense

net loss - $90

sold same 1 BTC at $500


do you pay capital gains on $100 or $10?

Not a lawyer or accountant, but here's how I'd figure it.

You mined the bitcoin for a value of $400, it's the same as if your boss (for a typical job) paid you $400 that day.  So you add the $400 to your regular income.

You can then deduct the $490 (as a business expense expense if you're running your bitcoin mining as a business, or as a hobby expense if you're not a business but itemize your deductions).  Either way, you'd net out with zero income, so no extra tax there.  That said, consult with an accountant on whether you can deduct the extra $90 loss from your other income. Also, you can't deduct at all if you mine as a hobby, and you take the standard (non-itemized) deduction.

Next, you sold your bitcoin for $500. This means a capital gain of $500 - $400 = $100. So you pay capital gains on $100.

[Searing]

a story problem


mine 1 BTC at $400   - logged as income
Cost to mine that same 1 BTC - $490 logged as expense

net loss - $90

sold same 1 BTC at $500


do you pay capital gains on $100 or $10?

Not a lawyer or accountant, but here's how I'd figure it.

You mined the bitcoin for a value of $400, it's the same as if your boss (for a typical job) paid you $400 that day.  So you add the $400 to your regular income.

You can then deduct the $490 (as a business expense expense if you're running your bitcoin mining as a business, or as a hobby expense if you're not a business but itemize your deductions).  Either way, you'd net out with zero income, so no extra tax there.  That said, consult with an accountant on whether you can deduct the extra $90 loss from your other income. Also, you can't deduct at all if you mine as a hobby, and you take the standard (non-itemized) deduction.

Next, you sold your bitcoin for $500. This means a capital gain of $500 - $400 = $100. So you pay capital gains on $100.

i was told as a miner with the IRS guidelines...that state that bitcoin is "property" ie land...(my CPA laughed said i was a farmer) that i had to keep track of when/how much btc was when it hit my address *used the little chart on coinbase for my 16 transactions*...and thus that was my 'gross income" taxed at 25%

IF>>>> I sold any bitcoin before 1 year and 1 day (like land) I would have an additional 46% capital gains tax...if i just bought coin (did not mine it) and or sold my mined coin that i already paid taxes on to IRS after 1year and 1 day then the capital gains tax on the increase is 20 %

yeah sucks

on the other hand being a *farmer" equip/home business..etc etc ...did the short form of home business checked the box on form version etc* ....CPA went to town and on 16k of 'gross income" mining...i straight out owed 4K i paid 550 usd

so know I know how farmers do this stuff..borrow like hell ..hope next years crop comes in 'great' or in my case BTC is high next nov/dec when i can cash out some coin IRS target free

so it goes (should link a farming song here)

http://www.youtube.com/watch?v=umS3XM3xAPk


seems appropriate I'm about that clueless

Searing