If I purchased gpus for crypto mining and I wanted to sell them at a loss. Is there a way I can write off the loss?

[JS12881323432]

This was not tied to a business

[tagteam]

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@JS12881323432 wrote:
This was not tied to a business

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Was this a hobby then? For what purpose did you purchase the GPUs?

[JS12881323432]

I bought the GPUs to mine crypto so I would be invested in cryptocurrency. So I don't know how to classify it, wasnt really a hobby but the GPUs in the miner were used to gain crypto currency which is investing. So you could say the GPUs were a tool used to gain investments?

[tagteam · Accepted solution]

The GPUs would be considered to be "capital assets" and, as such, would involve capital gain or loss if they are sold.

However, in order to deduct a capital loss, you are going to have to take the position that they were purchased for investment purposes (which may be somewhat difficult in this case - you would basically have to claim that you were holding them for the prospect of appreciation in price).

[Opus 17]

Personal property you sell at a loss is not deductible, it's just life.  The loss on your GPUs is the same as your loss on a used car, used sofa, or dropping off your old clothes at Goodwill.

A loss on business property is deductible against business income, but you would have to declare your CC mining as a business, which would totally change your last few years of tax returns. And, depending on how you entered the equipment as a business asset, you might actually have a taxable gain when you sold them.

We can discuss this further if you want to re-do all your taxes for business activity. 

[tagteam]

For federal income tax purposes, there is a distinction between "personal property" and "personal-use property" with the former being all-encompassing (only excluding real property) and the latter being somewhat of a term of art.

Personal property can be held for personal-use or for investment purposes (e.g., gold coins, rare stamps, works of art, et al). In this instance, @JS12881323432 would need to have purchased, and held, the GPUs for investment purposes (i.e., the hope that the units would appreciate in price) in order for a capital loss to be recognized. 

[kirkhilles]

As a Crypto Miner, my understanding is this:

Your mining is either considered a "business" or a "hobby" by the IRS. To be a Business, it should be treated as a business. You would ideally incorporate, keep records, have enough revenue to be significant and so on. Otherwise, it's a hobby.

If it's a Hobby, you are out of luck. You have to report all Crypto earnings and cannot write off any expenses. You can't write off power and you can't write off your GPUs and definitely can't write off your loss as to the IRS it'd be like selling Legos for a loss - not reportable.

If you ARE classified as a business then you would file all of your expenses, income and so on and both the purchase and the sale of your assets would be their own line items.