Crypto Mining Taxes

When you mine cryptocurrency, the coins you receive are taxable as ordinary income at their fair market value on the day you mine them — that value also becomes your cost basis for future capital gains calculations.

If you mine as a hobby, you report the income but can't deduct mining expenses under current tax law.

If mining is a trade or business — meaning you do it regularly and with the intent to make a profit — you can deduct expenses like electricity, mining rigs, and even a portion of your internet bill, but you'll also owe self-employment tax on the net income.

The business-versus-hobby distinction matters a lot here because the deductions available to a mining business can significantly reduce what you owe, while hobby income is taxed in full with no offset.

Mining income is one of the areas the IRS watches closely, partly because exchanges report it and partly because miners tend not to realize it's taxable at all until they file.