Crypto Mining Taxes: Beginner's Guide 2026

If you’re mining cryptocurrency, you’re required to report your income on your tax return. 

Crypto mining taxes can be difficult to navigate, so let’s walk through the entire reporting process. In this article, we’ll cover everything you need to know about mining taxes, including how you can properly report mining income and whether you can deduct expenses to save money on your tax bill.

What is cryptocurrency mining?

Proof of Work cryptocurrencies like Bitcoin depend on miners to secure the blockchain and verify transactions. Miners solve complex mathematical problems with sophisticated computers and get rewarded with cryptocurrency. 

How are mining rewards taxed?

If you are mining cryptocurrency, you are subject to two different tax events: 

1. Income tax when you receive your mining rewards
2. Capital gains tax when you dispose of your mining rewards

When do I pay income tax on mining rewards?

Income received from mining is taxed as ordinary income based on the fair market value of your coins on the day you received them. This rule comes from IRS Notice 2014-21, the agency’s original guidance on cryptocurrency.

For example, if you successfully mined 0.25 BTC on March 15, 2026, you will pay income tax based on the price of Bitcoin in dollar terms on that date.

The tax rate you pay on your mining income is dependent on your income level. Here’s a breakdown of federal income tax brackets for the 2026 tax year.

You may be subject to additional state income taxes depending on where you reside.

When do I pay capital gains tax on mining income?

Capital gains or capital losses are incurred in the case of a disposal event. Examples of disposal events include trading your cryptocurrency for fiat, trading your cryptocurrency for other cryptocurrencies, and trading your cryptocurrency for goods and services. 

Your capital gain or loss will vary on how the price of your crypto has changed since you originally received it.

Here’s a simple formula to help you calculate your capital gains or losses: 

Capital Gains/Loss = Fair Market Value at Sale - Cost Basis

In this case, your proceeds are how much you received (in USD) when you disposed of your crypto. Meanwhile, your cost basis is how much it cost (in USD) to acquire your cryptocurrency.

Similar tax rules also apply to cryptocurrency staking taxes.

Is mining income taxed twice?

You’ll incur capital gains or losses when you dispose of your mined cryptocurrency, just as you would in any scenario where you sell, trade, or otherwise dispose of your crypto. You are not, however, taxed on the same income twice.

As mentioned earlier, mining rewards are taxed as ordinary income based on their fair market value at the time they are received. Any income you recognize from mining a coin becomes the cost basis in that coin moving forward. If a disposal later occurs, you will only incur a capital gain or loss based on how the price of your coins has changed vs. your cost basis.

Let’s showcase an example to better illustrate how this works.

In this example, Charlie only recognizes capital gain based on how the price of his BTC has changed since he originally mined it.

Pro Tip:

You can use cryptocurrency tax software like CoinLedger to automatically calculate the fair market value for all of your mined/staked cryptocurrency based on the date and time they were received. Just connect your wallet and let the software do the work!

What happens if I don’t report my cryptocurrency mining rewards on my taxes?

Willfully not reporting your mining rewards to the IRS can be treated as tax evasion, a serious crime with serious consequences. The maximum penalty for tax evasion is 5 years in prison and a fine of up to $250,000.

While crypto transactions are pseudo-anonymous, it’s important to remember that transactions on blockchains like Bitcoin are permanent. In the past, the IRS has worked with contractors to analyze the blockchain and crack down on tax fraud.

In addition, custodial exchanges now report sales of cryptocurrency, including coins you mined, to the IRS on Form 1099-DA, starting with 2025 transactions.

Should I track mining taxes on an ongoing basis?

Because cryptocurrency is taxed at time of receipt, it’s recommended that you keep track of your taxes on an ongoing basis. 

In the case that the value of your cryptocurrency falls significantly, you may find yourself in a situation where you can no longer afford your tax bill. 

To avoid this situation, some cryptocurrency miners choose to cash out a portion of their earnings on an ongoing basis so that they are able to afford tax payments even in the case of a severe market crash. 

Do I have to pay quarterly taxes on crypto mining?

The IRS requires you to pay quarterly taxes in the case of the following: 

1. You expect to owe more than $1,000 in tax after subtracting withholding and tax credits. 
2. You expect your withholding and refundable credits to be less than the smaller of 90% of this year’s tax or 100% of the tax shown on last year’s return (110% if last year’s adjusted gross income was more than $150,000).

If you meet both of these conditions, you should pay quarterly estimated taxes to the IRS. For the 2026 tax year, payments are due April 15, June 15, and September 15, 2026, and January 15, 2027. This requires keeping track of your tax liability on an ongoing basis.

Is Congress changing how mining is taxed?

Not yet. On September 16, 2026, the House Ways and Means Committee voted 38-5 to advance the Digital Asset Tax Certainty Act (H.R. 10357). For miners, the bill would treat mining and staking rewards as ordinary income, and it doesn’t change when that income is taxed. It would also treat this income as US-source income for US residents.

An earlier proposal to delay tax on mining and staking rewards until the coins are sold was left out of the bill. The bill still needs to pass the full House and the Senate, so none of this is law yet.

How to report crypto mining on your taxes: business vs. hobby

If you mine cryptocurrency as a hobby, you will report the value of the coins you earned on line 8v of Form 1040 Schedule 1 (“Digital assets received as ordinary income not reported elsewhere”).

While mining as a hobby, you are not allowed deductions to offset expenses like electricity and hardware costs. Hobby expenses used to be deductible as miscellaneous itemized deductions, but that deduction has been permanently eliminated.

On the other hand, if you run your mining operation as a business, you will report your income on Schedule C if you’re a sole proprietor or a single-member LLC. In this scenario, you can deduct the ordinary and necessary expenses of your business. We recommend maintaining quality records of your expenses in case of an audit.

There’s a trade-off. Business miners also pay self-employment tax of 15.3% on their net mining income, reported on Schedule SE. In 2026, the 12.4% Social Security portion applies to the first $184,500 of earnings, and the 2.9% Medicare portion applies to all of it. On the plus side, you can deduct half of your self-employment tax, and you may qualify for the 20% qualified business income deduction.

Remember, you don’t get to pick whichever label saves you more. The IRS looks at factors like whether you mine regularly, keep business-like records, and intend to make a profit.

Not sure if your operation should be considered a business or a hobby? See the following article from the IRS explaining the two here.

Which tax forms do crypto miners need?

What tax deductions are available for mining businesses?

If you mine cryptocurrency as a business, you can write off your expenses associated with the business. These deductions are not available for hobby miners. 

Here are some of the expenses that mining businesses can deduct. 

Electricity

Mining cryptocurrency can lead to high electricity bills. Luckily, mining businesses can deduct these costs as expenses. 

To deduct electricity costs from your tax bill, it’s important to record the amount of electricity that is used exclusively for mining. If you’re using a home office or another property that uses electricity for purposes not related to mining, you should consider using a separate electricity meter to measure usage. 

These types of ‘mixed-use’ expenses between business and personal use are likely to be scrutinized in the case of an audit, which makes it important for miners to keep detailed records. 

Equipment

In most cases, the cost of your mining equipment can be written off as a deduction in the year of purchase through Section 179. For 2026, you can expense up to $2,560,000 of equipment, and the limit starts to phase out once you place more than $4,090,000 of equipment in service during the year.

In addition, equipment acquired after January 19, 2025 qualifies for 100% bonus depreciation. Any cost you don’t write off in the first year is deducted over several years through depreciation.

Repairs

If you’ve made any repairs to your mining equipment, you’ll likely be able to claim a deduction on this in your tax returns. Make sure to keep a record of the cost of these repairs in case of an IRS audit. 

Rented space

If you’re renting out space to run a cryptocurrency mining operation, you’ll likely be able to deduct this cost as a business expense. 

If you're mining cryptocurrency in a home office, you’ll likely be able to claim a deduction based on how much of your home is being exclusively dedicated to your mining operations. 

In case of an IRS audit, you should keep documentation that proves that your home is being used for mining.

How crypto tax software can help

Trying to keep track of all the data that comes with mining and trading cryptocurrency can quickly become a time-consuming task. Luckily, there’s an easier way to report your mined cryptocurrency to the IRS: crypto tax software like CoinLedger.

CoinLedger is used by thousands of cryptocurrency miners to track their income. A complete income report is exportable by all users which details income associated from crypto activity. Additionally, CoinLedger will automatically build out your form 8949 for your capital gains and losses transactions.

You can take this generated report and give it to your tax professional to file or simply upload it into tax filing software like TurboTax or TaxAct.