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I got one of these cheap RX580s in 2019, and, after not really using it for much, proceeded to use it to mine ETH throughout 2021. I was shocked that such an af

I got one of these cheap RX580s in 2019, and, after not really using it for much, proceeded to use it to mine ETH throughout 2021. I was shocked that such an affordable GPU could mine (somewhat) profitably; I did the math, and it seemed like the card would pay for itself if I mined for a few months. ...and then I discovered US crypto taxes, which triggered on every single incremental payout from the mining pool I used (NiceHash). Taxes completely wiped out my mining profits. And now after the merge it won't be profitable to mine ETH again anyway. :/ I'm now trying to get the card to run Stable Diffusion, and I'm having a terrible time with that too, since it's just old enough to not support the latest Linux ROCm driver.

chrisco255 4y ago
> ..and then I discovered US crypto taxes, which triggered on every single incremental payout from the mining pool I used How much were you earning off a single GPU? Surely low enough to fit under your standard deduction?
- ar-nelson 4y ago
  There was probably a way I could have figured out how to keep the profits, but because I only made a few hundred from mining, and I had other capital gains (from stocks) that made that whole part of my taxes complicated, it just wasn't worth the effort and the risk of an audit to try to find a loophole. I printed the forms from TaxBit and paid what it said. People say that US taxes are kept complicated because the tax prep companies profit, or because Republican politicians benefit from frustration at taxes. But I think this is a bigger reason: a lot of people, myself included, when faced with paying extra taxes that just "don't seem right", would rather pay extra that go through the complication of figuring out how to fix them. So the government gets extra tax revenue that they technically didn't require.
  - ctvo 4y ago
    > People say that US taxes are kept complicated because the tax prep companies profit, or because Republican politicians benefit from frustration at taxes. But I think this is a bigger reason: a lot of people, myself included, when faced with paying extra taxes that just "don't seem right", would rather pay extra that go through the complication of figuring out how to fix them. So the government gets extra tax revenue that they technically didn't require. So you think people overpay more commonly when faced with complexity and confusion in the tax code vs. underpaying or not paying at all? Is that right? Also the confusion you're describing is also what drives your first reason: > People say that US taxes are kept complicated because the tax prep companies profit People need to use professional services because they're not sure.
    - squeaky-clean 4y ago
      It's pretty well acknowledged that the American tax system is heavily under the influence of lobbyists from tax filing companies like Intuit. You don't see these sorts of problems in other countries for individual or self employment taxes
    - sgtnoodle 4y ago
      The tax code is too complex. I've consulted professional tax accountants three times over the last decade. Professionals don't understand it either. The first one was an oaf in Los Angeles that charged me $500 to redo a back-of-the-envelope calculation I had already done. The second one was an older lady in Silicon Valley. You would think she would have known how ISOs work, but she messed up the calculations anyway. There were no penalties, but she felt bad enough that she filed my taxes for free. She got cancer and retired 6 months later. The third was a friend that prepares taxes for billionaires. His retainer is something like $15K per year. His software's calculations disagreed with my homemade spreadsheet by $40K. In April my spreadsheet ended up within a few thousand of TurboTax. He's still kicking himself over that...
- smeyer 4y ago
  If you're working a fulltime job, you're very likely to already be well over the standard deduction. It still sounds like the commenter doesn't fully understand the tax situation and might have paid more than they truly owed, but I can't imagine they'd owe $0 on the profits if they're in the US unless they had minimal other income that year.
  - ghaff 4y ago
    In the US, especially absent a large mortgage or significant charitable deductions, it's very possible--even probable--that, given tax changes about five years ago, you're within your standard deduction. I certainly am in a normal year.
    - smeyer 4y ago
      I think we're saying different things. If I'm reading correctly, you're saying that most people don't need to itemize and can take the standard deduction, and I certainly agree. I'm saying that OP will need to report even a small amount of income from crypto mining since their income (not itemized deductions) will be more than the standard deduction and the crypto mining will cause them to owe additional income tax.
patricklorio 4y ago
I’m confused, taxes only apply to profit and you can write off the expenses of the video card.
- lm28469 4y ago
  > you can write off the expenses of the video card. As a random person who buys a graphic card to mine coin you can deduct the card price ?
  - bombcar 4y ago
    Only if you are a "business" and using it for business purposes. And the IRS has all sorts of things to detect a hobby vs a business - https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business https://www.irs.gov/newsroom/earning-side-income-is-it-a-hob... So for example if you build a workshop in your garage and start making fine wood items, even if you sell them it may not be a business, and count as a hobby. Usually the IRS is trying to find people with "perpetually money-losing businesses that are deducting each year" but you could get caught up in some cases.
- seanmcdirmid 4y ago
  They might not have known that. You’d be surprised how often people say “Taxes completely wiped out my profits becuase I didn’t realize I could deduct my expenses!” Also, in some industries, like marijuana distribution, you really can’t deduct a lot of your expenses.
  - thealfreds 4y ago
    If it was with a single card there probably isn't enough expense to go over the standard deduction.
    - teraflop 4y ago
      Your ability to deduct business expenses using Schedule C has nothing to do with the standard deduction. (And if you don't treat it as a business expense, you probably can't deduct it no matter what.)
gjs278 4y ago
shiftpgdn 4y ago
This doesn't make sense. Your tax on creating the coin is only your marginal tax rate. Even if you had a 37% tax rate that means the other 63% was being eaten by electricity?
- ar-nelson 4y ago
  Yes, I was making a very small marginal profit after electricity. And the tax rate was around 30% once you combine federal and Massachusetts taxes, I don't remember exactly what it was. And anything I cashed out was double-taxed: first the payout from NiceHash, then the conversion from BTC (what they pay out in) to USD.
  - teraflop 4y ago
    > And anything I cashed out was double-taxed That's not how US taxes work. You're not "double-taxed" because when you sell your coins, you only pay tax on the capital gains i.e. the difference from the original value, which you were already taxed on. (Assuming you correctly and accurately report the sale, that is.) In other words, each dollar you receive is taxed as income or as capital gains, but not both. Also, I'm not sure what you mean by triggering taxes "on every single payout". This is no different from a job that's taxed "on every single paycheck" -- all you have to actually report is the total at the end of the year.
    - ar-nelson 4y ago
      That's what I thought too. It didn't make sense at the time, and still doesn't, but the TaxBit forms showed a tax on both the payouts and the BTC->USD transaction. There was probably something I could have done to remove one of them, but I don't know enough about capital gains taxes to figure it out, and paying a professional would have cost as much as the tax I was trying to avoid.
      - mminer237 4y ago
        You would get taxed twice, but it wouldn't stack. If you earned $15 of Bitcoin, you'd get $15 added onto your tax bill at payout. Then if Bitcoin jumped to $20 and you sold it a couple months later, you'd have the $5 difference of short-term capital gains taxes added on then.
usednet 4y ago
I’m not a tax avoidance advocate but you really reported your few hundred in mining profits? In similar situations I’d wage 99% of miners don’t report and have never had problems.
- themitigating 4y ago
  You're reasoning for violating the law is that the probability if getting caught is low?
  - 300bps 4y ago
    Pretty much everyone uses this mentality with some law. Ever go 46 MPH in a 45 MPH zone?
    - nightski 4y ago
      Tax evasion and speeding are not in the same category of crime, not even close. One is generally an infraction (not even a misdemeanor) and the other is a felony.
      - collegeburner 4y ago
        fr speeding can cause injury to others especially when done more than a bit, unless you're a highly trained driver or smth. tax evasion causes no physical harm to anyone.
        deleted 4y ago
        [deleted]
      - unethical_ban 4y ago
        Evading a few bucks from running numbers on your graphics card is not laundering money to fund trafficking or depriving schools of books.
      - Dylan16807 4y ago
bzxcvbn 4y ago
> which triggered on every single incremental payout from the mining pool I used I can't really see how small taxes spread out over small pay-outs would be different from a large tax over the total. It's your marginal tax rate anyway.
yojo 4y ago
Same story, bought an RX580 to build a budget gaming box, ended up mining with it to pay for the rig. Electricity in Oregon is pretty cheap, and I optimized well (30Mh/s), but my margins were healthy. I switched to another pool that paid out less often after realizing the accounting nightmare that nicehash makes. I did make a cost basis tracker, not sure if the APIs still work tho: https://github.com/igmcdowell/nicehash-basis-tracker https://github.com/igmcdowell/nicehash-basis-tracker As others said, you should pay taxes on the initial value of coins on receipt, but when you convert to fiat you only owe taxes on the change in value since you received it (your cost basis). You might even have a small loss at this point if the value of BTC dipped between receipt and sale. Usual IANAL/Tax person disclaimer.

chrisco255 4y ago

> ..and then I discovered US crypto taxes, which triggered on every single incremental payout from the mining pool I used How much were you earning off a single GPU? Surely low enough to fit under your standard deduction?

ar-nelson 4y ago
There was probably a way I could have figured out how to keep the profits, but because I only made a few hundred from mining, and I had other capital gains (from stocks) that made that whole part of my taxes complicated, it just wasn't worth the effort and the risk of an audit to try to find a loophole. I printed the forms from TaxBit and paid what it said. People say that US taxes are kept complicated because the tax prep companies profit, or because Republican politicians benefit from frustration at taxes. But I think this is a bigger reason: a lot of people, myself included, when faced with paying extra taxes that just "don't seem right", would rather pay extra that go through the complication of figuring out how to fix them. So the government gets extra tax revenue that they technically didn't require.
- ctvo 4y ago
  > People say that US taxes are kept complicated because the tax prep companies profit, or because Republican politicians benefit from frustration at taxes. But I think this is a bigger reason: a lot of people, myself included, when faced with paying extra taxes that just "don't seem right", would rather pay extra that go through the complication of figuring out how to fix them. So the government gets extra tax revenue that they technically didn't require. So you think people overpay more commonly when faced with complexity and confusion in the tax code vs. underpaying or not paying at all? Is that right? Also the confusion you're describing is also what drives your first reason: > People say that US taxes are kept complicated because the tax prep companies profit People need to use professional services because they're not sure.
  - squeaky-clean 4y ago
    It's pretty well acknowledged that the American tax system is heavily under the influence of lobbyists from tax filing companies like Intuit. You don't see these sorts of problems in other countries for individual or self employment taxes
  - sgtnoodle 4y ago
    The tax code is too complex. I've consulted professional tax accountants three times over the last decade. Professionals don't understand it either. The first one was an oaf in Los Angeles that charged me $500 to redo a back-of-the-envelope calculation I had already done. The second one was an older lady in Silicon Valley. You would think she would have known how ISOs work, but she messed up the calculations anyway. There were no penalties, but she felt bad enough that she filed my taxes for free. She got cancer and retired 6 months later. The third was a friend that prepares taxes for billionaires. His retainer is something like $15K per year. His software's calculations disagreed with my homemade spreadsheet by $40K. In April my spreadsheet ended up within a few thousand of TurboTax. He's still kicking himself over that...
smeyer 4y ago
If you're working a fulltime job, you're very likely to already be well over the standard deduction. It still sounds like the commenter doesn't fully understand the tax situation and might have paid more than they truly owed, but I can't imagine they'd owe $0 on the profits if they're in the US unless they had minimal other income that year.
- ghaff 4y ago
  In the US, especially absent a large mortgage or significant charitable deductions, it's very possible--even probable--that, given tax changes about five years ago, you're within your standard deduction. I certainly am in a normal year.
  - smeyer 4y ago
    I think we're saying different things. If I'm reading correctly, you're saying that most people don't need to itemize and can take the standard deduction, and I certainly agree. I'm saying that OP will need to report even a small amount of income from crypto mining since their income (not itemized deductions) will be more than the standard deduction and the crypto mining will cause them to owe additional income tax.

patricklorio 4y ago

I’m confused, taxes only apply to profit and you can write off the expenses of the video card.

lm28469 4y ago
> you can write off the expenses of the video card. As a random person who buys a graphic card to mine coin you can deduct the card price ?
- bombcar 4y ago
  Only if you are a "business" and using it for business purposes. And the IRS has all sorts of things to detect a hobby vs a business - https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business https://www.irs.gov/newsroom/earning-side-income-is-it-a-hob... So for example if you build a workshop in your garage and start making fine wood items, even if you sell them it may not be a business, and count as a hobby. Usually the IRS is trying to find people with "perpetually money-losing businesses that are deducting each year" but you could get caught up in some cases.
seanmcdirmid 4y ago
They might not have known that. You’d be surprised how often people say “Taxes completely wiped out my profits becuase I didn’t realize I could deduct my expenses!” Also, in some industries, like marijuana distribution, you really can’t deduct a lot of your expenses.
- thealfreds 4y ago
  If it was with a single card there probably isn't enough expense to go over the standard deduction.
  - teraflop 4y ago
    Your ability to deduct business expenses using Schedule C has nothing to do with the standard deduction. (And if you don't treat it as a business expense, you probably can't deduct it no matter what.)

gjs278 4y ago

shiftpgdn 4y ago

This doesn't make sense. Your tax on creating the coin is only your marginal tax rate. Even if you had a 37% tax rate that means the other 63% was being eaten by electricity?

ar-nelson 4y ago
Yes, I was making a very small marginal profit after electricity. And the tax rate was around 30% once you combine federal and Massachusetts taxes, I don't remember exactly what it was. And anything I cashed out was double-taxed: first the payout from NiceHash, then the conversion from BTC (what they pay out in) to USD.
- teraflop 4y ago
  > And anything I cashed out was double-taxed That's not how US taxes work. You're not "double-taxed" because when you sell your coins, you only pay tax on the capital gains i.e. the difference from the original value, which you were already taxed on. (Assuming you correctly and accurately report the sale, that is.) In other words, each dollar you receive is taxed as income or as capital gains, but not both. Also, I'm not sure what you mean by triggering taxes "on every single payout". This is no different from a job that's taxed "on every single paycheck" -- all you have to actually report is the total at the end of the year.
  - ar-nelson 4y ago
    That's what I thought too. It didn't make sense at the time, and still doesn't, but the TaxBit forms showed a tax on both the payouts and the BTC->USD transaction. There was probably something I could have done to remove one of them, but I don't know enough about capital gains taxes to figure it out, and paying a professional would have cost as much as the tax I was trying to avoid.
    - mminer237 4y ago
      You would get taxed twice, but it wouldn't stack. If you earned $15 of Bitcoin, you'd get $15 added onto your tax bill at payout. Then if Bitcoin jumped to $20 and you sold it a couple months later, you'd have the $5 difference of short-term capital gains taxes added on then.

usednet 4y ago

I’m not a tax avoidance advocate but you really reported your few hundred in mining profits? In similar situations I’d wage 99% of miners don’t report and have never had problems.

themitigating 4y ago
You're reasoning for violating the law is that the probability if getting caught is low?
- 300bps 4y ago
  Pretty much everyone uses this mentality with some law. Ever go 46 MPH in a 45 MPH zone?
  - nightski 4y ago
    Tax evasion and speeding are not in the same category of crime, not even close. One is generally an infraction (not even a misdemeanor) and the other is a felony.
    - collegeburner 4y ago
      fr speeding can cause injury to others especially when done more than a bit, unless you're a highly trained driver or smth. tax evasion causes no physical harm to anyone.
      - deleted 4y ago
        [deleted]
    - unethical_ban 4y ago
      Evading a few bucks from running numbers on your graphics card is not laundering money to fund trafficking or depriving schools of books.
    - Dylan16807 4y ago

bzxcvbn 4y ago

> which triggered on every single incremental payout from the mining pool I used I can't really see how small taxes spread out over small pay-outs would be different from a large tax over the total. It's your marginal tax rate anyway.

yojo 4y ago

Same story, bought an RX580 to build a budget gaming box, ended up mining with it to pay for the rig. Electricity in Oregon is pretty cheap, and I optimized well (30Mh/s), but my margins were healthy. I switched to another pool that paid out less often after realizing the accounting nightmare that nicehash makes. I did make a cost basis tracker, not sure if the APIs still work tho: https://github.com/igmcdowell/nicehash-basis-tracker https://github.com/igmcdowell/nicehash-basis-tracker As others said, you should pay taxes on the initial value of coins on receipt, but when you convert to fiat you only owe taxes on the change in value since you received it (your cost basis). You might even have a small loss at this point if the value of BTC dipped between receipt and sale. Usual IANAL/Tax person disclaimer.