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The concept of an excise tax on Bitcoin miners was proposed in the 2024 federal budget by the Biden administration as part of the Digital Asset Mining Energy (DAME) tax. However, it was ultimately dropped in partisan debt ceiling negotiations in May 2023.

Current Taxation of Bitcoin Miners

In the United States, Bitcoin mining rewards are taxed as ordinary income upon receipt, regardless of whether mining is done as a hobby or as a business. Miners must report their income from mining on Form 1040 Schedule 1, Line 8, as "Other Income."

Business vs. Hobby Mining

For business miners, income from mining is subject to self-employment tax, covering social security and Medicare contributions, depending on the legal structure chosen for the mining operation. Business miners can also deduct mining-related expenses from their taxable income.

Tax Implications for Node Operators

Node operators, who validate transactions on the blockchain without receiving mining rewards, are not financially rewarded and do not have taxable income.

Tax Software and Reporting

Specialized crypto tax software, such as CoinTracking, can help automate the process of determining crypto mining income and generating tax reports.

Key Takeaways

Bitcoin mining rewards are taxed as ordinary income in the US. Business miners are subject to self-employment tax and can deduct mining-related expenses. Node operators do not have taxable income. Crypto tax software can assist with reporting and compliance.

Note: The proposed excise tax on Bitcoin miners was not enacted, and the current taxation framework remains in place.