Coins earned by validating transactions. Ordinary income at value when received; if done as a business, subject to self-employment tax and eligible for expense deductions.
Mining rewards are income at the value when received, and if mining is a business rather than a hobby, the income is subject to self-employment tax with electricity, hardware depreciation, and hosting deductible against it. Coins later sold produce a separate capital gain or loss from that basis.
It depends on profit motive, regularity, and scale. A business gets deductions and pays self-employment tax; a hobby reports income with no deductions. We document the position.
Last reviewed September 10, 2026. Tax rules change; confirm current law before acting.
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