Mining crypto how to deal with the tax

studdlymurphy · 31-03-2021 3:52pm #1

Hi All,
Im searching but cant seem to see, if it already here maybe someone can point me to it?

Im setting up a mining rig but sure how to deal with the tax.

if the rig earns about 10euro per day:
Can I average that to a week or month or even quarter before paying the tax on the earning?
How often do I need to pay the tax? can I wait until I am cashing out to euro?
Is there any options to save some of the tax due?
the tax due, is that at the marginal rate of income tax? 20% or 40% depending on what your current tax situation is.
USC, this is due also?.

Thank you and apologies if this info is already some place else but I cannot see it.

JibJabWibWab · 01-04-2021 10:58am

studdlymurphy wrote: »

Hi All,
Im searching but cant seem to see, if it already here maybe someone can point me to it?

Im setting up a mining rig but sure how to deal with the tax.

if the rig earns about 10euro per day:
Can I average that to a week or month or even quarter before paying the tax on the earning?
How often do I need to pay the tax? can I wait until I am cashing out to euro?
Is there any options to save some of the tax due?
the tax due, is that at the marginal rate of income tax? 20% or 40% depending on what your current tax situation is.
USC, this is due also?.

Thank you and apologies if this info is already some place else but I cannot see it.

If you just hold the mined crypto in your wallet you won't be liable for tax until you sell it for cash or trade the crypto for another crypto.

Google Capital Gains Tax (CGT) to understand what tax you would be liable to if you sell or trade the crypto.

studdlymurphy · 01-04-2021 1:28pm

JibJabWibWab wrote:

Google Capital Gains Tax (CGT) to understand what tax you would be liable to if you sell or trade the crypto.

OK so income tax on the mined currency and then CGT on any gain in value but only payable when sold?

JibJabWibWab · 01-04-2021 1:40pm

studdlymurphy wrote: »

OK so income tax on the mined currency and then CGT on any gain in value but only payable when sold?

No income tax, just CGT when you sell the crypto for cash or another crypto.

It's exactly the same as if you were actually mining gold, you're not taxed until you sell it.

Mellor · 02-04-2021 4:18am

JibJabWibWab wrote: »

No income tax, just CGT when you sell the crypto for cash or another crypto..

That’s incorrect.
Mining crypto is income. It is taxed as income tax.
Holding is CGT.

studdlymurphy · 02-04-2021 4:17pm

Mellor wrote:

Thatâ€™s incorrect. Mining crypto is income. It is taxed as income tax. Holding is CGT.

Thank you so how do I calculate it? Daily would be a huge task as the rate changes Daily or can you average per week or month? I'm not trying to cheat the tax I want to be tax compliant also don't want to be tortured calculating the tax or big account fees.
Thanks for the advice mellor

Rob2D · 02-04-2021 4:22pm

studdlymurphy wrote: »

Thank you so how do I calculate it? Daily would be a huge task as the rate changes Daily or can you average per week or month? I'm not trying to cheat the tax I want to be tax compliant also don't want to be tortured calculating the tax or big account fees.
Thanks for the advice mellor

I suppose it's the same? You wait until you cash out any of it, then apply income tax to that? Would love to know as I was lucky enough to get a new GPU cheap and work have ordered me a new PC too so I'll be doing a lot of mining for the rest of the year.

Mellor · 04-04-2021 6:42am

studdlymurphy wrote: »

Thank you so how do I calculate it? Daily would be a huge task as the rate changes Daily or can you average per week or month? I'm not trying to cheat the tax I want to be tax compliant also don't want to be tortured calculating the tax or big account fees.
Thanks for the advice mellor

I’m sure it’s perfectly fine to average it over a given period. Just make sure it’s not costing you extra with rate fluctuations.

BOHtox · 12-04-2021 6:24am

Mellor wrote: »

That’s incorrect.
Mining crypto is income. It is taxed as income tax.
Holding is CGT.

Is this the same with staking?

Mellor · 12-04-2021 7:04am

BOHtox wrote: »

Is this the same with staking?

Staking isn't really clear imo.
There's a case to be made that it's generating an earning, thus income tax.
But you could also argue that it's more inline with with how bonus shares are treated - as it essential a reward for investing.

Pretty with that CGT is a lower liability than income tax, so I'd be going that justification personally.

studdlymurphy · 12-04-2021 4:33pm

Mellor wrote: »

I’m sure it’s perfectly fine to average it over a given period. Just make sure it’s not costing you extra with rate fluctuations.

How often would I need to pay the tax? could I sell say 50% of mined currency every month and pay tax then also?

How does others do it? if I was expecting the currency to increase in value I would prefer to hold it and then pay the tax whenever I sell if that was an option, I know CGT would also come into play on any gains.

JibJabWibWab · 12-04-2021 5:43pm

Mellor wrote: »

That’s incorrect.
Mining crypto is income. It is taxed as income tax.
Holding is CGT.

Mining is only income if you trade the proceeds promptly and regularly.
If you hold the proceeds you are only liable to CGT when you trade.

Mellor · 13-04-2021 12:07am

studdlymurphy wrote: »

How often would I need to pay the tax? could I sell say 50% of mined currency every month and pay tax then also?

How does others do it? if I was expecting the currency to increase in value I would prefer to hold it and then pay the tax whenever I sell if that was an option, I know CGT would also come into play on any gains.

Standard income tax should be paid monthly I believe.
If the amount is under a certain threshold you can apply to make quarterly paymetns.

JibJabWibWab wrote: »

Mining is only income if you trade the proceeds promptly and regularly.
If you hold the proceeds you are only liable to CGT when you trade.

As above, this is still wrong. What OP said id correct.

Money earned "working" in income tax.
Gains made holding are CGT.
If you earn income and then hold it, both apply on the respective portions.

ie Earn 100k, hold it for 12months, trade it at 200k.
Liability is income tax on 100k, and CGT on 100k.

SlowBlowin · 13-04-2021 12:19am

Where would you stand if you mined all your coin (LTC) in 2013, then resident and salaried in a different country, and now retired in Ireland, no coin ever sold (other than to invest in different coin).

Mellor · 13-04-2021 12:55am

SlowBlowin wrote: »

Where would you stand if you mined all your coin (LTC) in 2013, then resident and salaried in a different country, and now retired in Ireland, no coin ever sold (other than to invest in different coin).

Mined in Ireland. Income tax in Ireland was due, however I'm not sure when the determination came in in regards to crypto being taxable.

Trading one coin to another is a "selling" for the purposes of CGT

JibJabWibWab · 13-04-2021 8:38am

Mellor wrote: »

Money earned "working" in income tax.
Gains made holding are CGT.
If you earn income and then hold it, both apply on the respective portions.

ie Earn 100k, hold it for 12months, trade it at 200k.
Liability is income tax on 100k, and CGT on 100k.

This is completely incorrect.

You cannot be taxed on the same asset twice.

SnuggyBear · 13-04-2021 9:09am

This is confusing. If you mine all year and cash out to euro at the end of the year do you pay income tax, cgt or both?

Can you use your Internet bill etc to deduct tax? The cgt is 33% on crypto in Ireland? That's crazy

The J Stands for Jay · 13-04-2021 9:14am

JibJabWibWab wrote: »

This is completely incorrect.

You cannot be taxed on the same asset twice.

You're not being taxed on the asset twice.

You get paid for mining, and that income is taxable when received. In this case, it just so happens that it's received in the form of bitcoin. It wouldn't matter if you were paid in cheese or Vietnamese Dong.

When you sell the coin for a profit, you have made a chargeable gain, and are then charged CGT.

JibJabWibWab · 13-04-2021 9:27am

Mellor wrote: »

Money earned "working" in income tax.
Gains made holding are CGT.
If you earn income and then hold it, both apply on the respective portions.

ie Earn 100k, hold it for 12months, trade it at 200k.
Liability is income tax on 100k, and CGT on 100k.

Mellor is saying here that you pay income tax when you mine 100k and if it appreciates you are liable for tax on the gain too. That is incorrect.

McGaggs wrote: »

You're not being taxed on the asset twice.

You get paid for mining, and that income is taxable when received. In this case, it just so happens that it's received in the form of bitcoin. It wouldn't matter if you were paid in cheese or Vietnamese Dong.

When you sell the coin for a profit, you have made a chargeable gain, and are then charged CGT.

You don't get "paid" for mining until you trade it for something else.
If you hold the proceeds you are only liable for CGT when trade it, not before.

Mellor · 13-04-2021 10:01am

JibJabWibWab wrote: »

This is completely incorrect.

You cannot be taxed on the same asset twice.

You aren't being taxed twice. They are two separate and independent systems of tax.

JibJabWibWab wrote: »

Mellor is saying here that you pay income tax when you mine 100k and if it appreciates you are liable for tax on the gain too. That is incorrect.

Earnings are liable for income tax.
Capital gains are liable for CGT.

What part of that is confusing?

You don't get "paid" for mining until you trade it for something else.
If you hold the proceeds you are only liable for CGT when trade it, not before.

Of course you get paid for mining. Why do people min is not to earn BTC.
Nobody said anything about being liable to CGT before you trade.

If your employer agrees to pay you in BTC (or any currency).
You are liable for income tax on your earnings.

If you convert that BTC to EUR. No more tax liability.
If you hold the capital asset. And it appreciates, you are liable for CGT on the gain.
If it falls in value you can write off the loss.

It's exactly the same as if get get paid in EUR and convert to BTC yourself.

JibJabWibWab · 13-04-2021 10:20am

Mellor wrote: »

You aren't being taxed twice. They are two separate and independent systems of tax.

I'm mining ETH. I'm holding the ETH I mine in a separate wallet. I'm going to hold this ETH for years.

You are suggesting that I should pay income tax on that ETH as I mine it and that I will also be liable for CGT on any appreciation on the ETH. That is incorrect.

I am only liable to CGT when I trade the ETH.

13-04-2021 10:39am

JibJabWibWab wrote: »

I'm mining ETH. I'm holding the ETH I mine in a separate wallet. I'm going to hold this ETH for years.

You are suggesting that I should pay income tax on that ETH as I mine it and that I will also be liable for CGT on any appreciation on the ETH. That is incorrect.

I am only liable to CGT when I trade the ETH.

They are suggesting you pay income tax on what you mine, and then CGT on any subsequent gain.
Mine €100, pay income tax on that, sell for €150, pay cgt on the €50 gain.

JibJabWibWab · 13-04-2021 10:42am

Deleted User wrote: »

They are suggesting you pay income tax on what you mine, and then CGT on any subsequent gain.
Mine €100, pay income tax on that, sell for €150, pay cgt on the €50 gain.

I know what they are suggesting. They are wrong. You cannot be taxed twice on the same asset.

The J Stands for Jay · 13-04-2021 11:44am

JibJabWibWab wrote: »

Mellor is saying here that you pay income tax when you mine 100k and if it appreciates you are liable for tax on the gain too. That is incorrect.

You don't get "paid" for mining until you trade it for something else.
If you hold the proceeds you are only liable for CGT when trade it, not before.

It doesn't matter what you receive in payment, it is considered income and is taxable. If you run a repair business and get paid in goats, shipping containers or magic beans, you have to assess the value of those items, calculate your income based on that value and pay the appropriate income tax. Whether you hold on to them or exchange them for local fiat currency is irrelevant to you tax position.

The J Stands for Jay · 13-04-2021 11:46am

JibJabWibWab wrote: »

I'm mining ETH. I'm holding the ETH I mine in a separate wallet. I'm going to hold this ETH for years.

You are suggesting that I should pay income tax on that ETH as I mine it and that I will also be liable for CGT on any appreciation on the ETH. That is incorrect.

I am only liable to CGT when I trade the ETH.

You are only liable to CGT when you trade the ETH. You are liable to income tax whenever you receive the ETH from mining

The J Stands for Jay · 13-04-2021 11:47am

JibJabWibWab wrote: »

I know what they are suggesting. They are wrong. You cannot be taxed twice on the same asset.

Very naïve to believe that you can't be taxed twice on the same asset. Our government tax us on some taxes.

Anyway, you are wrong in saying everyone else is wrong. Especially when 'everyone else' includes the revenue commissioners.

JibJabWibWab · 13-04-2021 12:08pm

McGaggs wrote: »

Very naïve to believe that you can't be taxed twice on the same asset. Our government tax us on some taxes.

Anyway, you are wrong in saying everyone else is wrong. Especially when 'everyone else' includes the revenue commissioners.

I didn't say "everyone else is wrong". You are wrong and Mellor is wrong. You cannot be taxed twice on the same asset.

The J Stands for Jay · 13-04-2021 12:14pm

JibJabWibWab wrote: »

I didn't say "everyone else is wrong". You are wrong and Mellor is wrong. You cannot be taxed twice on the same asset.

You're being taxed once on the income, and once on the asset. Revenue have issued ebriefs clarifying this.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

XVII · 13-04-2021 12:18pm

links with proofs would be nice in such conversations. From revenue.ie for instance.

JibJabWibWab · 13-04-2021 12:18pm

McGaggs wrote: »

You're being taxed once on the income, and once on the asset. Revenue have issued ebriefs clarifying this.

If you have a source please link it.

The J Stands for Jay · 13-04-2021 12:36pm

XVII wrote: »

links with proofs would be nice in such conversations. From revenue.ie for instance.

The burden of proof should fall on those trying to dispute the accepted facts. But anyway, proof is here https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

The J Stands for Jay · 13-04-2021 12:37pm

From Revenue.ie: "There are no special tax rules for cryptocurrencies."

JibJabWibWab · 13-04-2021 12:56pm

McGaggs wrote: »

The burden of proof should fall on those trying to dispute the accepted facts. But anyway, proof is here https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

Your (and Mellor's) opinion is not "accepted facts".

That ebrief, which I've seen before, does not confirm your position, the part on "income tax" is specifically for a business that derives some income from cryptocurrency, be it trading or mining. It just stipulates that any income from crypto should be clearly identified and recorded.

The tax levied on an individual who derives some income from crypto is CGT, which is 33%.
You do not derive any income until you trade the crypto, be it to cash or another crypto.

The J Stands for Jay · 13-04-2021 2:01pm

JibJabWibWab wrote: »

Your (and Mellor's) opinion is not "accepted facts".

That ebrief, which I've seen before, does not confirm your position, the part on "income tax" is specifically for a business that derives some income from cryptocurrency, be it trading or mining. It just stipulates that any income from crypto should be clearly identified and recorded.

The tax levied on an individual who derives some income from crypto is CGT, which is 33%.
You do not derive any income until you trade the crypto, be it to cash or another crypto.

From that pdf:

"Therefore no special tax rules for cryptocurrency transactions are required. "

"The profits and losses of a non-incorporated business on cryptocurrency transactions must
be reflected in their accounts and will be taxable on normal IT rules."

Mellor · 13-04-2021 2:12pm

JibJabWibWab wrote: »

You are suggesting that I should pay income tax on that ETH as I mine it and that I will also be liable for CGT on any appreciation on the ETH. That is incorrect.

You are wrong.

JibJabWibWab wrote: »

I am only liable to CGT when I trade the ETH.

Nobody has claimed any differently.
And that doesn’t exclude the existence of income tax. You’re just highlighting that you don’t understand the difference.

JibJabWibWab wrote: »

That ebrief, which I've seen before, does not confirm your position, the part on "income tax" is specifically for a business that derives some income from cryptocurrency, be it trading or mining. It just stipulates that any income from crypto should be clearly identified and recorded

You may have seen it before, but you didn’t understand it.
A self employed sole trader is a business for tax purposes. Mining crypto is earning income.
Income tax should be paid on all of your income.

JibJabWibWab wrote: »

The tax levied on an individual who derives some income from crypto is CGT, which is 33%.
You do not derive any income until you trade the crypto, be it to cash or another crypto.

Capital Gains Tax is paid on capital gains, never on income.
Income tax is paid on income.
I mean, there’s a clue is in the names. :rolleyes:

Trading an asset for a profit is not income. It’s capital gains. You seem to misunderstand what capital gains actually is.

Somebody asked for a source. The document is provided above. The relevant section is “income tax” (shocking).

Income tax
The profits and losses of a non-incorporated business on cryptocurrency transactions must be reflected in their accounts and will be taxable on normal income tax rules.

JibJabWibWab · 13-04-2021 2:12pm

McGaggs wrote: »

From that pdf:

"Therefore no special tax rules for cryptocurrency transactions are required. "

"The profits and losses of a non-incorporated business on cryptocurrency transactions must
be reflected in their accounts and will be taxable on normal IT rules."

Yes, and you clearly don't have a clue what any of those words mean.

Bob24 · 13-04-2021 2:13pm

JibJabWibWab wrote: »

Your (and Mellor's) opinion is not "accepted facts".

That ebrief, which I've seen before, does not confirm your position, the part on "income tax" is specifically for a business that derives some income from cryptocurrency, be it trading or mining. It just stipulates that any income from crypto should be clearly identified and recorded.

The tax levied on an individual who derives some income from crypto is CGT, which is 33%.
You do not derive any income until you trade the crypto, be it to cash or another crypto.

This might not be what suits you, but what others have said is correct.

Practical exemple

You mine 100 euros worth of BTC: this is 100 euros worth of income on which you pay income tax.

You are free to sell these for euros immediately after mining them and if you do so you won't be paying any CGT.

Now if you decide to keep the BTC to bet on capital appreciation, the price doubles, and subsequently you sell them for 200 euros. Then you are making 100 euros worth of capital gains, and you are paying CGT on those 100 euros*.

You were not taxed twice on anything: you paid income tax on the 100 euros you mined, and you paid CGT on your other 100 euros of capital gains.

More here: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/

* of course if this is your only gain of the year, CGT exemption applies as you are below the threshold.

JibJabWibWab · 13-04-2021 2:16pm

Bob24 wrote: »

This might not be what suits you, but what others have said is correct.

Practical exemple

You mine 100 euros worth of BTC: this is 100 euros worth of income on which you pay income tax.

You are free to sell these for euros immediately after mining them and if you do so you won't be paying any CGT.

Now if you decide to keep the BTC to bet on capital appreciation, the price doubles, and subsequently you sell them for 200 euros. Then you are making 100 euros worth of capital gains, and you are paying CGT on those 100 euros*.

You were not taxed twice on anything: you paid income tax on the 100 euros you mined, and you CGT on your other 100 euros of capital gains.

More here: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/

* of course if this is you only gain of the year, the CGT exemption applies.

The key line in your link;

If the crypto asset transactions are regarded as being a trading activity the profits would be subject to income tax/corporation tax, CGT would apply to transactions in crypto-assets that are held as investments.

It's either or, not both.

Bob24 · 13-04-2021 2:17pm

JibJabWibWab wrote: »

The key line in your link;

It's either or, not both.

This sentence relates to trading. Not to mining.

JibJabWibWab · 13-04-2021 2:19pm

Bob24 wrote: »

This sentence relates to trading. Not to mining.

Incorrect. Read it again. The line is in the Income Tax / Corporation Tax section.

Income Tax / Corporation Tax

The profits and losses arising to individuals and companies on crypto-asset transactions are taxable under normal income tax and corporation tax rules.

One of the common questions arising is whether the profits or losses arising from crypto-asset transactions are subject to income tax/corporation tax or subject to capital gains tax (“CGT”). If the crypto asset transactions are regarded as being a trading activity the profits would be subject to income tax/corporation tax, CGT would apply to transactions in crypto-assets that are held as investments.

JibJabWibWab · 13-04-2021 2:21pm

Mellor wrote: »

A self employed sole trader is a business for tax purposes. Mining crypto is earning income.

Who is the self employed sole trader in this thread? The OP? I don't believe OP has said that...

Bob24 · 13-04-2021 2:22pm

JibJabWibWab wrote: »

Incorrect. Read it again. The line is in the Income Tax / Corporation Tax section.

What it says is that if you are a professional trader, then CGT doesn't apply to gain you make on trading (i.e. buying and selling crypto). Income tax applies instead.

Mining is not trading.

The J Stands for Jay · 13-04-2021 2:26pm

JibJabWibWab wrote: »

Yes, and you clearly don't have a clue what any of those words mean.

Point out which ones, and I'll put you right

JibJabWibWab · 13-04-2021 2:26pm

Bob24 wrote: »

What it says is that if you are a professional trader, then CGT doesn't apply to gain you make on trading (i.e. buying and selling crypto). Income tax applies instead.

Mining is not trading.

Have you read your own link at all?

It is likely that profits derived from crypto mining activities, whether carried on by an individual or a company, would be regarded as trading profits subject to income tax/corporation tax rather than CGT

If you pay income tax on it then you don't pay CGT.

The J Stands for Jay · 13-04-2021 2:27pm

JibJabWibWab wrote: »

The key line in your link;

It's either or, not both.

It's both, with one happening after the other. Getting the coin in exchange for mining is income. Holding the coin for appreciation in value is a capital gain. Two separate things, both of which are taxed.

JibJabWibWab · 13-04-2021 2:28pm

McGaggs wrote: »

It's both, with one happening after the other. Getting the coin in exchange for mining is income. Holding the coin for appreciation in value is a capital gain. Two separate things, both of which are taxed.

You cannot be taxed twice on the same asset.

The J Stands for Jay · 13-04-2021 2:28pm

JibJabWibWab wrote: »

Who is the self employed sole trader in this thread? The OP? I don't believe OP has said that...

Someone who is mining and isn't a limited company is a self employed sole trader.

The J Stands for Jay · 13-04-2021 2:30pm

JibJabWibWab wrote: »

If you pay income tax on it then you don't pay CGT.

That's right, you don't pay CGT on the transaction which provided you with the coin. You lay income tax on that transaxtion. You pay CGT when you dispose of the coin.

Bob24 · 13-04-2021 2:31pm

JibJabWibWab wrote: »

Have you read your own link at all?

If you pay income tax on it then you don't pay CGT.

Yeah it says income tax.

I gave a very clear example showing that nothing is being taxed twice.

13-04-2021 2:32pm

You are mixing terms.
Carrying on a trade in Revenue terminology = doing some activity for profit broadly = subject to income tax if unincorporated, subject to corporate income tax if incorporated.
Eg being a self employed electrician, greengrocer, farmer

The J Stands for Jay · 13-04-2021 2:33pm

JibJabWibWab wrote: »

You cannot be taxed twice on the same asset.

You aren't being taxed twice on the asset. You are being taxed once on the income (which could be euro, cabbage, gold, revenue don't care, it's all taxable), and then again on the increase in value of the asset when you dispose of it.

Mining crypto how to deal with the tax

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