How to calculate mining profitability before you spend
Mining profit is the value of the coins you mine minus electricity, pool, and hardware costs, based on current network data and a current exchange rate.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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Mining pays you in coins, and the costs arrive in dollars. The calculation compares the two over one period, such as a day.
What is the basic profit formula?
The formula is mined crypto value minus electricity, pool, and hardware costs. Mined value is the estimated coins times an exchange rate.
What do you need before you start?
Gather your own numbers first. You need the miner's wattage, your electricity rate, and the pool fee.
How do you calculate mining profitability?
Use one period, such as a day, for every figure. Estimate the coins, convert them to dollars, then subtract the costs.
- 1Estimate daily coinsDivide your hashrate by the network hashrate, then multiply by the blocks found in a day and the block reward. Take your pool share after its fee. Bitcoin's block reward was cut in April 2024, so use a current figure.
- 2Convert coins to dollarsMultiply the coins by a current exchange rate taken the same day as your network data.
- 3Subtract power and pool costsMultiply wattage by run hours and by your rate, converting to kilowatt hours. Take the pool fee off revenue and allow for downtime.
- 4Spread hardware costDivide the cost of the rig, wiring, and ventilation by its expected days of use.
What records and taxes come after mining?
The IRS treats crypto as property, so mining income is ordinary income when you receive the coins. Report the fair market value that day. A mining business can deduct expenses such as electricity and pool fees, but hobby costs are generally not deductible.
- Record the value on each payout day.
- Keep receipts for power, pool fees, and equipment.
- Track the cost basis of each coin you keep.
Frequently asked questions
You subtract nothing for power, so the result leaves out the largest ongoing cost. The lease may limit high power gear.
Check the numbers before you buy equipment, and again when coin value, difficulty, or the reward changes.
Yes. Higher difficulty usually means the same hashrate earns fewer coins, so revenue falls unless coin value rises.
A pool combines miners and pays each a share minus a fee. Solo mining pays the full reward when you find a block, but less predictably.
