Hi,
I started small crypto mining (along with farming, staking, and play to earn) in 2021. I understand that if I file these income as a hobby, I won't be able to deduct expenses. My question is, is it worth it to file these as self-employment so I can deduct expenses or just pay the associated tax that it incur? Say with these income, I have to pay perhaps couple (plus more) thousands.
List of my expenses are (but not limited to):
- Mining hardware (such as computer components, graphics cards, power supply)
- Electric bill for these computer(s) (I have a meter for each computer and computed expenses per month)
- For crypto farming (DeFi) expenses, there are what we called impermanent loss, and also gas fees (and yes it adds up).
- For play to earn, I guess not much really expenses here as this falls in the Capital gains / loses. One example is when buying NFT and later on selling it for a loss as it lost it value over time.
I have receipts for the mining hardware stuffs and a complete transaction reports for crypto farming (DeFi) and staking from crypto tax aggregator software (online tool).
Hoping to reduce taxes I have to pay but also avoid getting audited because I chose to use the wrong form (hence hobby income and expenses vs self-employment income or expenses).
Thanks
