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11 sats \ 9 replies \ @freetx 8h \ parent \ on: Bitcoin Hashprice Falls to Record Low... bitcoin_Mining
It depends.
C Corp tax rate is 21% - but LLC's are pass-thru entities, which are taxed at your personal tax rate.
So say you sell $200K in long-term capital gains (ie. you sell bitcoin held for 1+ years) which may be taxed at an effective 5% tax rate (0% for the first $97K married-filing-jointly, and at 10% for the next 150K), then having a $100K deduction will give you big benefits.
The "bonus depreciation" loss does not directly offset capital gains on a dollar-for-dollar basis, but it reduces your overall taxable income, so in this contrived example you would adjust down your AGI from $200K to $100K which would result in a nearly 0% tax bill....
cap gains is 15%
So if you spent 200k thats a 103k deduction beyond standard, which at 15% is just ~15k in tax savings (0% over all but still only 15k savings)
You don't get taxed at the top rate from the bottom of the income when rates are graduated
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15%
If you reduce your AGI by $100K then your new taxable income is $100K
Further points:
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You purchase the miners using bitcoin, no additional sales of bitcoin are necessary to buy them so no additional tax hit happens on the purchase.
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You will earn bitcoin over the term (say 3 years)
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The mining hardware will still have a residual value at the end of it (say 25%) so at 3 years you can sell the hardware and get more income
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Lastly if the bitcoin price goes up during that term that you are massively up.
As I said, the hurdle rate is your tax bill. You can take a $15,000 tax bill (in the case of $200K of long term capital gains) and produce some number greater than $15,000 by playing the "bonus depreciation" game....this is why real-estate itself is such a popular investment for the rich. The deductions transfer the immediate tax burden into a potential longer term gain by spending the money
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You'd otherwise be able to depreciate the miners over the 3 years anyway, so it still comes down to whether or not the miners themselves are economical. You're not going to sink 200k into miners just to pull forward 2 years of depreciation, which would be only 10k savings in this current year.
The pull forward I think is more about keeping executives in stocks this year knowing things would get tight, and a massive earnings pump going into mid-terms next year (since all depreciation will hit earnings this year instead of next)
... now you've got me talking myself into at least looking at mining stocks fml
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You'd otherwise be able to depreciate the miners over the 3 years anyway, so it still comes down to whether or not the miners themselves are economical.
True, but depending on your specific tax situation, being able to claim 100% right now in year 1 may reap benefits that wouldn't serve you if you had to depreciate over a longer term....Being able to reduce your AGI today from $200K -> $100K (in the case of long-term cap gains + a $100K miner purchase) may be a much bigger benefit than reducing by $33k per year in the same scenario.
... now you've got me talking myself into at least looking at mining stocks fml
I think AI purchases also qualify....now you know why Nvidia is booming too...
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Nvidia is booming too
There's may be a relation there with the AI chips and ASIC chips, hoarding, given the chatter from IC about a blockade of Taiwan... ASICS also get new datacenters cash flowing while AI chips are backordered
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while AI chips are backordered
And its not generally possible for a solo person to earn money by buying AI chips....you're not being paid in bitcoin day-in day-out on that purchase. Thats why miners are such a better deal for individuals whereas AI chips are only a tax benefit to big corporates
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Everyone should expect a 2027 blockade of Taiwan
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Wulf, Iren, CIFR
plus clean spark, riot, mara, hut
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