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Pros and Cons of Cryptocurrency Mining as a Trade or Business
As cryptocurrency grows in popularity, more people are turning to what is known as mining as a way to bring in some extra income. However, not all mining activities are equal; small differences in the facts and circumstances can have substantial impact on the tax consequences. Much of the nuance hinges on whether the activity is a trade or business under Section 162, which, in many circumstances, may not be a simple thing to determine. If you choose to treat your mining as a business, earned bitcoin is reported on a Form 1040 Schedule C. The benefit of this is the ability to deduct mining expenses as deductions for your crypto business. Along with direct costs to mine the digital currency, treating the work as a business opens the door to additional tax reduction strategies. To learn how to maximize your crypto mining activity, keep reading.
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CURRENT EDITION
Lessons Learned from the Tax Court: What’s at Stake?
Astute readers of this publication may recognize that I frequently write on Cryptocurrency and also on Tax Court cases. It feels like Christmas to me to be able to write about a tax court case about crypto. This is only the Third Tax court case to even mention crypto, and the first to look at the underlying principles of taxation. (The other two were about including crypto assets in a CDP hearing and a frivolous tax protester argument). Today’s case, Paschall v. Commissioner, is about the taxation of staking income.
What’s New With Hobby Loss: Recent Developments in Section 183
Recent developments in the Section 183 (Hobby loss) area have not led me to change my basic conclusions. Taxpayers who have a sincere objective of ultimately making a profit should not hesitate to claim losses from the underlying activities. That is so even if you believe that profits are improbable. It is critical that they meet the standard of behaving in a businesslike manner. The other regulatory factors should not be ignored, but often there is not that much you can do about them. Reilly’s 18th Law of Tax Planning – Honest objective trumps realistic expectation.
The Art of Income Shifting: Powerful Planning Strategies That Stand Up to Scrutiny
Income shifting strategies address taxation at its most fundamental level by directing income to taxpayers in lower brackets or with offsetting deductions. Unlike many tax strategies that merely time recognition or enhance deductions, effective income shifting can permanently reduce the tax burden on a given dollar of income—often creating tax savings that compound year after year. In this article, we’ll explore systematic approaches to income shifting that create extraordinary value for clients while maintaining impeccable compliance.
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