Hi @lulukern123 ,
Thank you for joining us today!
If you earn cryptocurrency by mining it, it's considered taxable income on the day you receive the crypto. You would report the income using the fair market value of the cryptocurrency on the day you received it. Most mining companies do not issue Form 1099 to report income so be sure to keep detailed records of the receipt date and fair market value of your mined crypto earnings.
If mining is a hobby, you would report this income on Schedule 1 as Other Income and pay income taxes. If you are mining as a source of income, you would need to report on Schedule C. If you report on Schedule C, you can offset your income with the expenses related to mining, however you will be subject to self employment taxes in addition to income tax.
When you sell or spend the crypto, you then have a capital transaction resulting in a capital gain or loss that needs to be reported on your tax return on Schedule D. In simple terms, you would use the fair market value of the crypto when you sold it reduced by the fair market value of the crypto when it was received. Remember, you have already paid taxes on the fair market value of the crypto at the time you received it so now you will only need to pay taxes on the gains while you have held the crypto (or report losses).
Here is a great TurboTax article with examples of mining.
Your Crypto Tax Guide
