- The IRS enforces income taxation at extraction and capital gains tax upon sale.
- Miners express concerns over reduced profitability due to this.
- Mining cryptocurrency involves more complex tax reporting responsibilities now.
This IRS policy affects miner profitability, liquidity, and accounting due to fluctuating crypto values.
IRS Stance on Cryptocurrency Mining
The U.S. Internal Revenue Service has reaffirmed that cryptocurrency mined is taxed upon extraction as income and again as capital gain upon sale. Bitcoin miners must now accurately report income for each mined coin. Miners are required to track each coin’s fair market value when received, and again if sold, the gains or losses must be reported. This approach is unlike most other industries where profits are only taxed on sale. The implications on liability and cash flow are significant, especially if cryptocurrency drops in value. Industry players stress that miners already grapple with volatility and thin margins, and the added tax burden increases complexity. Historical IRS policies have consistently employed this twofold taxation tactic, periodically refining reporting requirements, yet maintaining the dual-taxation framework for mined crypto.
Taxpayers need to report crypto, other digital asset transactions on their tax return. — IRS (U.S. Internal Revenue Service)
The absence of statements from key industry leaders on platforms like Twitter or LinkedIn suggests ongoing analysis within the sector. The regulatory lens on cryptocurrency differs sharply from other raw materials like gold, emphasizing the complexity and challenging profit assessment for crypto miners.
