Hello nbizic56,
Thanks for joining us today. As to your question, the cost basis you would have for the crypto is the value at the time you mined it. You cannot reduce that cost by any expenses related to the mining. Mining income is treated as ordinary income.
Additionally, because you mention it is a hobby, "Beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income," so you won't be able to deduct the cost of electricity anywhere else if it is truly a hobby.
On the other hand, if it is more than a hobby and actually an additional source of income, you may be able to can claim the income and expenses on Schedule C, meaning the income is reported as the value when you mined it and the expenses are everything you determined as the cost to do that mining. However, you need to understand how the IRS determines the difference between a hobby and a business venture. This article will help.
Any capital gain or loss is determined by the difference between what you sold it for and the value of when you mined it, regardless of whether it is treated as a hobby or business venture.
I hope that helps.
