Is crypto mining taxable? How to file taxes?

In many countries, cryptocurrencies must be taxed. Trading, spending or selling cryptocurrencies are generally taxable events. Capital gains and losses must be taken into account when taxes and dues are calculated. If you receive cryptocurrency payments, you may also be subject to tax. As the regulatory framework for taxation of cryptocurrencies varies from country to country, it is recommended to consult local tax professionals.

This article focuses on how cryptocurrency mining is taxed in the United States, and you need to understand the IRS's guidance on mining income in detail. The IRS first published its guidelines on taxation of cryptocurrencies in 2019 and clarified how taxes from the mining industry should be filed.

One key point to note is that cryptocurrency mining rewards should be taxed when they are collected, not when they are sold. Each time crypto miners receive cryptocurrency from mining in their wallets, they should declare the market price as a cost basis for reporting total revenue. When you successfully mine a cryptocurrency, you trigger a taxable event. General income tax rates range from 10% to 37%, depending on your tax bracket.

If you're only mining the occasional passive income on a computer, you should report your income as an income from hobby. The IRS will treat your profits as general income and you will be taxed at the same rate as any other source of income. You will report this income as “other income” in IRS Form 1040 Schedule 1.

 If crypto mining is your primary income and you own a crypto mining rack and operate multiple professional mining machines, then you should report your income as a “business” in IRS Form 1040 Schedule C.

If you think it's burdensome in filing your taxes, you can also use crypto tax software to simplify filing your taxes for mined cryptocurrencies.