Cryptocurrency Mining, is it a Capital Gain or Business Income? Profit from selling Cryptocurrency can be considered as capital gains or operating income.
Since Cryptocurrency is generally looked at as an asset that is traded for value, you would assume it is always treated as a capital asset. There are instances when you work in the industry of Cryptocurrency where there is legitimate business income being produced. Hence this should be tax at the operating income rate.
Here are some guidelines to help define what the case is for you:
Do you buy and sell cryptocurrency on a regular basis for the objective of making profits and is this a legitimate business?
Are you running the operation as a true business?
Where do you acquire assets in inventory and have a a proper business template?
Do you advertise your services or products in the cryptocurrency space?
Do you have the purpose of making profits even if they are not currently in the short term?
Do you have the purpose to make a profit in the future?
Are your Operating processes generally comprised of a repetitive process? All processes must be evaluated separately.
Sometimes even a single transaction can be considered as operating income. All cases must be looked at separately.
Here are types of cryptocurrency operating businesses:
Cryptocurrency exchange platforms
Cryptocurrency buying and selling
How to treat income from cryptocurrency mining:
First we must determine is the cryptocurrency mining a hobby or a business. When a minor is involved in cryptocurrency they will be paid once the cryptocurrency is validated. Fees are payments in cryptocurrency and fees associated to the validation. If the mining is treated as a business operation with consistent mining tasks occurring. And the intention of making a profit then they should be looked at as operating income.