It’s getting to be tax time – have you prepared your mining taxes? If Bitcoin mining and cryptocurrency mining is considered a taxable activity in your country, you may have to report how much you mined, when you mined it, and how much it was worth at the time.
The Miners’ Union introduces the Mining Tax Estimator built for Miners’ Union clients and open to the public. Any user of Antpool can use our application to determine their mining income to determine their mining taxes for Bitcoin, Bitcoin Cash, Litecoin, and Dash. Other currencies will be expanded upon request.
Try it out at taxes.theminersunion.com
How it Works
First of all, this is not a 1099. This is not an official form congruent with any governmental or tax-collecting agency. Instead, this is a tool to help prepare the information needed to file one’s mining taxes to make the process a bit less manual. If you hand this information to your accountant, they’ll thank you for making their life a bit easier when preparing your cryptocurrency tax returns.
Second, this is not indicative of capital gains requirements generated from the movement of cryptocurrency. If you mined and HODL’ed then these reports will be fairly 1:1 with your situation. If you participated in any trading, converting to fiat, or any other transfers in and around the blockchain, then this chart will not be representative of your tax status.
About the Tax Calculations
We’ve spoken at length on what you need to know about Bitcoin mining taxes. As such, we’re making it very easy for our clients to readily evaluate how much bitcoin and cryptocurrency they mined over time.
Many countries have issued guidance that Bitcoin mining and other forms of cryptocurrency mining are taxable activities. For example, the Miners’ Union home country – the United States – has issued guidance that says the following:
Q: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
A: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.
Given this guidance, we need to understand a) how much was mined each day, and b) what the exchange rate (“price”) of the cryptocurrency to the currency used to pay your taxes (fiat) was on that day. So we thread a few things together and do a little math:
- Grab the payment history from the pool (currently limited to Antpool).
- Snag a price history from an exchange that offers a currency pair directly back to the fiat currency of choice (we avoid triangle trade calculations).
- Calculate income generated daily. The remainder of the unrealized gain or loss is attributed to capital gains.
This then shows what your taxable income would be under this method. If you have not yet moved the coin, then any additional value over this income would be unrecognized capital gains.
Help me Understand
Here’s a helpful analogy to help you understand how the United States government thinks about Bitcoin mining.
Imagine you bought a magic box that printed shares of stocks. You take it home, turn it on, and check your brokerage account each day to find a share of the stock of your choice has appeared in your account. You earned something – you did some form of work (provided electricity) and received property (stock shares of your favorite tech company). From a tax perspective, the value of the stock when it was received would be considered income, to be added to whatever you made from your day job.
You check back a week later and the stock has doubled! You have twice as much money now! Do you owe more taxes? That depends:
- If you sell it to realize a profit, you’ll owe more taxes. The increase in value is known as capital gains and is treated differently based on how long you’ve held it for (e.g. in the US it’s the difference of less than a year or more than a year to be considered “short term capital gains” or “long term capital gains” respectively. You’d owe capital gains tax – at whatever your rate – in addition to the income tax.
- If you haven’t sold anything yet, then it’s an unrealized gain. It still has time to go up… or down. If you don’t sell it, you’ll only own income tax.
Bitcoin mining is no different. What it’s worth the day you get it is income, and any change in value after that is capital gains.
Expenses and Depreciation – A Gray Area
There is a bit of a gray area as to how to handle the “costs” associated with mining. Here are some questions to discuss with your accountant or tax professional, as the legality and benefit derived from these choices are highly specific to each individual:
- Could a miner can to be associated with a company to be able to depreciate the initial expense of the miner?
- Can I expense my electricity, rent, insurance, or colocation fees as a cost?
How to Use the Tax Calculator:
Currently, the application is configured to work with miners who use Antpool. Therefore, to use this application, you’ll need an Antpool account, and an Antpool API. If you’re unsure how to generate an Antpool API key, we’ve prepared a handy guide for you.
Users will need to select the cryptocurrency they’d like to generate a report for. Currencies are currently generated separately. Next, the user need only supply the parameters necessary to access their Antpool details: their user Id or handle, their API key, and their API secret. Note that you can pass these in to the website through the url to avoid death by copy/paste.
If you decide to generate an API key to observe this app, be sure to delete the key when you’re done with it to prevent any unauthorized use, though rest assured that Antpool does not allow you to alter the wallet settings or take miners offline using the API.
The application can be run in two ways. The user can decide to output the results directly to a comma-separated value (CSV) file, or observe the results in the browser. Results can be downloaded after observing them in the browser.
The following additional settings can be configured to further customize your reports:
- Tax year: Constrain the results to a given tax year. Alternatively, users can select “*” to see all years.
- Base Currency: For our non-US users, EUR and GBP reports are available where direct crypto/fiat tradable pairs are accessible. Additional exchanges to other foreign currencies may be added upon request.
- Exchange: The application is configured to use GDAX as the exchange for Bitcoin, Bitcoin Cash, and Litecoin. Kraken is the default exchange used for Dash. Other exchanges are available and can be pushed live upon request.
Mining Taxes Estimation Details
To calculate the tax basis of a miner’s proceeds, we’ll need two things: the amount mined per day and the price on that day. We strike the price mined at the time the transaction was received.
The payments data comes from Antpool, which is why we need the above data to access it. We then need the price at the time of each disbursement. We retrieve the price data directly from each exchange API as of 00:00:00 GMT (as crypto never sleeps) for consistency across exchanges. Antpool strives to distribute at 02:00:00 GMT, so it’s a decent proxy.
The first results you’ll notice are the total amount of cryptocurrency produced, and mining income generated. We’ve then prepared two graphs to make understanding your year of mining a bit easier. We show the daily calculation of cumulative mining income and the outstanding capital gains. The next graph shows total value of the cumulative cryptocurrency mined, and its respective value in your fiat currency of choice.
We hope that this handy application helps our clients, as well as fellow miners around the world when it comes to understanding and computing their taxes. Mining is an essential part of cryptocurrency networks and we believe that following your local rules and regulation is the best path forward for the monetary infrastructure of the future.
The reports this app generates are not gospel and the tax considerations outlined may not apply to you and your specific situation. We encourage all miners to discuss their tax situations with an accountant or tax professional and not rely solely on the results of this application.
We appreciate any feedback the community has on this application.
Have a feature request? Let us know!
 You’d expect that as other people discovered the wonders of your magic box, they’d in turn set out to purchase magic boxes of their own. As more people unwrap and plug in their own magic boxes, the amount your magic box puts in your account each day declines as there are more people drinking from the same proverbial fountain. For more information on miner profitability and pay out projections, check out the Mining Calculator and its supporting documentation.