Taxes On Bitcoin Mining

taxes on bitcoin mining

“Why not mine cryptocurrencies yourself and make fast money,” many people ask. But there are some dangers lurking, especially because taxes can be incurred. We’ll explain when this is usually the case.

Buy and sell Bitcoins – those who hope to profit from the enormous price rises of the Bitcoins by the classical investment of money. Others go among the “home-grown” and make their own Bitcoins. As a result, they are rewarded – yes, that’s how it is – with Bitcoins. Those who meet the technical requirements can therefore join the gold prospectors. However, he should know that taxes can be incurred.

Cryptocurrency Miners do not purchase, but produce

If you create blocks in the Bitcoin blockchain by mining, you create new bitcoins and get 12.5 bitcoins per block. From a tax point of view, the difference to the mere trade (buying and selling) with Bitcoins is decisive: A Miner does not purchase Bitcoins, but produces them himself.

Result: In contrast to trading, in mining we do not have a private sale transaction that could be taxed. This does not mean, however, that the state does not collect taxes in any other way. After all, the law knows all kinds of other nice types of income. The quiz question is: Is mining only carried out occasionally or is the miner on the road commercially and really wants to make a profit with it?

Anyone who does the whole thing just on he side and occasionally “only” earns income that isn’t related to his usual job and normal salary. The emphasis here is on “only” because income tax on such other small income sources only has to be paid from a certain amount in a year.

Commercial Mining

But you can also raise the mining one size bigger and pursue the plan to achieve sustainable profits with it. It is enough for the miner to plan to repeatedly make his computing power available in order to develop an independent source of income. In commercial terms, one acts in any case if the Miner buys extra hardware for it.

Consequence: The Miner has income from trade enterprise. That brings some at expenditure with itself. He is suddenly a tradesman with the usual duties: He must announce a trade, provide a profit determination and deliver a trade tax return. The Miner must tax the profits from the sale or the exchange. However, he may deduct from his income the costs he incurs for mining (e.g. electricity costs) as operating expenses.

By the way: the same applies to the simple acquisition of Bitcoins as soon as this is done commercially with the intention of making a profit. However, this is rather rare in comparison to mining.

Or: Within the Framework of private Activity

As mentioned above, the mere acquisition plus sale or exchange or redemption of Bitcoins is normally covered by private divestiture transactions. The same applies if the Bitcoin is used as a means of payment. These private sales transactions are taxable if there is less than one year between purchase and sale. If Bitcoins are purchased at different times and thus at different rates, the following applies: first-in-first-out. Thereafter, the Bitcoins that were purchased first are deemed to have been sold first.

The profit is determined quite simply: selling price minus acquisition costs. However, the tax liability only arises if the total profit in the calendar year exceeds the exemption limit of 600 EUR, i.e. if the profit exceeds 600 EUR, the total profit is taxable and not just the part exceeding 600 EUR.

The Crux: Loss Offsetting

So if Bitcoins are occasionally produced by mining or sold privately and later, there is of course the danger that losses will be made. And that can become really expensive. The concern is justified – after all, the enormous price fluctuations do not exactly speak for stability. There is currently a hype. But nobody can predict how long this will last. And what if suddenly nobody wants the Bitcoin any more and the whole system might collapse? Then exactly these people have a problem.

Reason: Taxation at the private level also means that losses are only offset against profits from other private sales transactions. The same applies to losses that are generated during mining and subsequent sale: These losses can also only be offset against similar gains. For example, any Bit coin losses cannot be offset against gains from securities transactions such as shares, derivatives, etc., which have been included in income from capital assets since 2009. If hobby miners or private Bitcoin traders no longer show profits from similar services because the system no longer exists, this will be of little use to them.

Turnover Tax completely different

The situation is quite different with turnover tax. Because there is basically no sales tax, as the achievement of Miners is not at all controllable, because no achievement exchange is present. This is because the transaction fee that other users voluntarily pay to the miner is not directly related to the miner’s performance. Also the remuneration of the Miner by receipt of new Bitcoins does not justify an exchange of services. Reason: The service recipient cannot be identified.


Anyone who decides to seriously mine should consider whether it is really worthwhile for him. This is because they not only have to pay taxes, but are also bound by a number of entrepreneurial obligations.

Disclaimer: The information in this article may not be consistent with the tax regimes of certain countries. Please also check with other sources or your tax advisor whether the information in this article applies to your personal situation.

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