Crypto Mining Tax Implications in the U.S. for 2026
Jan, 26 2026
When you mine cryptocurrency, you’re not just earning coins-you’re earning taxable income. The IRS doesn’t see Bitcoin or Ethereum as money. They see them as property. That changes everything. Every time you successfully mine a block and get rewarded, that reward is taxed as ordinary income the moment it hits your wallet-even if you never sell it. And when you later trade, sell, or spend that crypto, you owe capital gains tax on any increase in value since you received it. This isn’t optional. It’s the law. And in 2026, the IRS is watching closer than ever.
How Crypto Mining Is Taxed: Two Separate Events
There are two taxable events in crypto mining, and you have to track both. First: when you get paid. Second: when you move that crypto.
Let’s say you mine 0.5 Bitcoin on March 12, 2025, and at that exact moment, Bitcoin is trading at $62,000. Your income for that day is $31,000. That’s it. You don’t wait until you sell. You don’t wait until you cash out. The moment the coins are credited to your wallet-whether it’s your personal wallet, a mining pool account, or an exchange-you owe income tax on that $31,000. The IRS calls this the constructive receipt doctrine. It doesn’t matter if you didn’t touch it. You had control. You got paid.
Now, let’s say you hold that 0.5 Bitcoin until December 2025, when Bitcoin hits $70,000. You sell half of it-0.25 BTC-for $17,500. Your cost basis for that 0.25 BTC was $15,500 (half of the original $31,000). So your capital gain is $2,000. That’s taxable again. This time, as a capital gain. If you held it less than a year, it’s taxed at your regular income rate-up to 37%. If you held it over a year, you get the lower long-term rate: 0%, 15%, or 20%, depending on your total income.
Business Miner vs. Hobby Miner: Big Difference in Deductions
Not all miners are treated the same. If you’re mining as a business-meaning you’re doing it regularly, with equipment, and aiming to make a profit-you can deduct almost all your costs. That includes electricity bills, cooling systems, internet fees, mining rig repairs, even rent for your warehouse space. You report all this on Form 1040, Schedule C. You subtract your expenses from your mining income. What’s left is your net profit, and that’s what gets taxed.
But if the IRS decides you’re a hobby miner-maybe you run one old GPU in your garage and only mine occasionally-you can’t deduct expenses beyond your mining income. And you can’t use losses to offset other income. That means if you spent $10,000 on electricity and only earned $6,000 in mining rewards, you still owe tax on $6,000. You can’t write off the $4,000 loss. The IRS looks at factors like your intent, time spent, and whether you’ve made a profit in past years to decide if you’re a business or hobbyist.
Quarterly Tax Payments Are Non-Negotiable
Most people get taxes withheld from their paychecks. Miners don’t. If you’re making $50,000 a year from mining, the IRS expects you to pay taxes on that as you earn it-not just in April. That means you need to make quarterly estimated tax payments on April 15, June 15, September 15, and January 15.
Missing these payments triggers penalties. Even if you’re not sure how much you’ll earn, you’re required to estimate. The safe harbor rule lets you pay 100% of last year’s tax liability (or 110% if your income was over $150,000) to avoid penalties. Many miners use crypto tax software to project quarterly income and automate payment schedules.
2025’s Biggest Change: Form 1099-DA and Wallet-by-Wallet Accounting
Starting January 1, 2025, every U.S. crypto exchange and mining pool must issue Form 1099-DA for all digital asset transactions-including mining rewards. This form reports the fair market value of your rewards at the time they were received. The IRS now has a direct feed of your mining income. No more guessing. No more hiding.
Even worse: the IRS killed the old “average cost” method for calculating capital gains. Now, you must track cost basis wallet by wallet. If you mined Bitcoin into Wallet A and later transferred it to Wallet B, you can’t just average the cost across all your holdings. You must know exactly which coins you sold, which wallet they came from, and when you received them. This isn’t theoretical-it’s a compliance nightmare for anyone who moved coins between wallets without tracking.
Imagine this: you mined 0.1 BTC in January at $50,000, another 0.1 BTC in July at $65,000, and sold 0.15 BTC in December at $70,000. Which 0.1 BTC did you sell? The first one? The second? The IRS doesn’t care what you think-you have to prove it. If you can’t show which coins you sold and what their cost basis was, the IRS can assume the highest possible gain-and tax you accordingly.
What You Must Track: The Minimal Record-Keeping Checklist
You don’t need fancy software, but you absolutely need records. Here’s what you must save for every mining reward:
- Date and exact time of receipt (UTC)
- Amount and type of cryptocurrency received
- USD fair market value at the moment of receipt (use a reputable exchange like Coinbase or Kraken)
- Wallet address where the reward was sent
- Transaction ID from the blockchain explorer
- Any fees paid to the mining pool
For expenses, keep:
- Electricity bills with dates and amounts
- Receipts for mining hardware (ASICs, GPUs, power supplies)
- Invoices for cooling systems, internet service, facility rent
- Logs or screenshots from mining pool dashboards
Many miners take screenshots of their mining pool’s reward history every day. Others use tools like CoinTracking, Koinly, or ZenLedger that auto-import data from mining pools and exchanges. These tools calculate your income, track cost basis across wallets, and generate Form 8949 and Schedule D for you.
Common Mistakes That Trigger IRS Audits
Most miners don’t get audited because they’re hiding something. They get audited because they didn’t keep records.
- Not reporting mining rewards at all
- Using the wrong FMV (e.g., using the price at the end of the day instead of the exact time of receipt)
- Claiming business deductions without receipts
- Failing to make quarterly payments
- Assuming transferring crypto between wallets doesn’t count as a taxable event (it doesn’t-but tracking it does)
- Ignoring the digital asset question on Form 1040 (checking “No” when you mined is a red flag)
The IRS has already started sending letters to taxpayers who received mining rewards but didn’t report them. If you got one, don’t ignore it. File amended returns. Pay what you owe. The penalty for late filing is 5% per month, up to 25%. The penalty for fraud? Up to 75% of the tax owed.
What to Do Next: Action Plan for 2026
If you mined crypto in 2025:
- Gather all mining pool statements and wallet histories
- Use a crypto tax tool to calculate income and capital gains
- Reconcile your records with any Form 1099-DA you received
- File Schedule C if you’re a business miner
- Complete Form 8949 and Schedule D for all disposals
- Answer “Yes” to the digital asset question on Form 1040
If you plan to mine in 2026:
- Set up a dedicated wallet for mining rewards
- Choose a tax tool and connect it to your mining pool
- Track every expense from day one
- Set aside 30-40% of each reward for taxes
- Make quarterly payments on time
Don’t wait until April. The rules aren’t going away. The IRS isn’t backing down. The only way to stay safe is to be ahead of them.
Do I have to pay taxes if I mine crypto but never sell it?
Yes. You owe income tax on the fair market value of the crypto when you receive it. Selling it later triggers a separate capital gains tax. Not selling doesn’t make the income disappear.
Can I deduct my electricity bill if I mine crypto at home?
Only if you’re operating as a business. You can deduct the portion of your electricity bill that’s directly attributable to mining. Keep a log showing your rig’s power draw and hours of operation. Many miners use a separate circuit with a dedicated meter to make this easier.
What happens if I don’t report my mining income?
The IRS now gets direct reports from mining pools and exchanges via Form 1099-DA. If you didn’t report income they already know about, you’ll likely get a notice. Penalties include 25% of the underpaid tax, plus interest. In severe cases, the IRS can pursue criminal charges for tax evasion.
Is mining crypto in a pool different from solo mining for tax purposes?
No. The tax treatment is the same. Whether you mine solo or in a pool, you owe income tax when the reward is credited to your wallet. The pool doesn’t pay your taxes for you. You still need to track the exact time and value of each payout.
Can I use the FIFO method to calculate crypto gains from mining?
No. The IRS no longer allows average cost or FIFO for crypto. You must track cost basis by wallet and by acquisition date. If you transfer coins between wallets, you must know which coins you’re moving and what their original cost basis was. Crypto tax software handles this automatically.
Will Pimblett
January 27, 2026 AT 12:46Christopher Michael
January 28, 2026 AT 13:11Parth Makwana
January 28, 2026 AT 18:26Elle M
January 29, 2026 AT 16:12Rico Romano
January 30, 2026 AT 01:24Crystal Underwood
January 30, 2026 AT 15:35Raymond Pute
January 31, 2026 AT 02:19Jack Petty
January 31, 2026 AT 11:25Meenal Sharma
February 2, 2026 AT 07:31Freddy Wiryadi
February 2, 2026 AT 14:13Brianne Hurley
February 3, 2026 AT 17:19