How crypto mining income is taxed in the US
In the US, the IRS taxes mining rewards as ordinary income at fair market value when received, and a mining business usually owes self-employment tax.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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- Mining rewards are ordinary income when received.
- A mining business usually owes self-employment tax.
- Your basis equals the income you reported.
- Later sales or swaps can create capital gain or loss.
You will work through how the IRS taxes mining income in the US and what records to keep. You need the date, dollar value, and wallet details for each reward. The IRS treats crypto as property, so mining income is taxed as ordinary income when you receive it.
How is mining income taxed?
A mining reward is payment for work, so the IRS taxes it as ordinary income at fair market value when you receive the coins. That value is the US dollar price on the date of receipt, and you report it for that year.
How do you report it step by step?
Your filing path depends on whether mining is a trade or business or a hobby. A business reports income and costs on a business return; hobby income is taxable, but costs are treated differently.
- 1Value each rewardNote the US dollar value on the day the coins arrive. That amount is your income.
- 2Report the incomeInclude it on your return for that year. Sole proprietors usually use Schedule C.
- 3Figure self-employment taxA mining business usually owes this tax on net earnings. Use Schedule SE.
- 4Deduct mining expensesSubtract ordinary and necessary costs such as electricity. Hobby and personal limits can apply.
- 5Set your basisYour basis equals the income you reported for the coin. You need this number for a later sale.
- 6Report later sales or swapsA sale or swap creates capital gain or loss: amount received minus basis.
What records should you keep after mining?
Keep a record for each reward and each later disposition. The IRS expects miners to document receipt, sale, exchange, or other disposition of digital assets.
Frequently asked questions
Yes. You owe tax on the reward in the year you receive it. A later sale below that value can create a capital loss.
Hobby income is still taxable, and hobby costs are generally not deductible. They usually cannot offset the hobby income.
A mining business can show a loss when costs exceed income. Excess business loss rules can limit how much offsets other income.
Treat each pool payout as income when it reaches your wallet, at that day's value. The pool may not send a form, so your records supply the numbers.
