If you earn anything from your mining, you must include it as part of your gross income.
- If you were paid in a traditional currency (US dollars, Euros, etc.), you would simply include whatever amount you were paid (converting to US dollars, if the currency is foreign).
- If you were paid in Bitcoin or another digital currency, you must first determine the fair market value of the currency in US dollars on the day you received it, then include it.
Your mining could be considered self employment or as a hobby. The IRS expects that if you start a business, you of course intend to make money at it. If you don't, your business is likely to be a hobby. But, to make the decision if your business is a hobby, the IRS looks at numerous factors, including the following:
- Do you put in the necessary time and effort to turn a profit?
- Have you made a profit in this activity in the past, or can you expect to make one in the future?
- Do you have the necessary knowledge to succeed in this field?
- Do you depend on income from this activity?
- Are your losses beyond your control?
For more information on how the IRS compares self employment to hobby income, please see this TurboTax Blog post.
If you’re self-employed, your gross earnings from mining (minus allowable tax deductions) will be subject to the self-employment tax. We’ll help you figure out the right amount.
If you were not given a 1099-MISC for your Bitcoin mining work, follow these steps in TurboTax to enter your income.