Could Bitcoin mining turn a major business expense into a tax-saving opportunity?
In this episode, Mike Jesowshek and Colin from Leverage Mining explore how owning mining equipment could help business owners earn Bitcoin and claim potential tax deductions. They break down the upfront costs, participation requirements, and why a tax write-off alone isn’t enough to make this investment worthwhile.
You’ll learn who this strategy might suit, what a four-year commitment involves, and the risks to consider before getting started.
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Chapters:
(01:00) Bitcoin Mining vs. Buying Bitcoin
Bitcoin mining involves owning equipment that earns Bitcoin, rather than purchasing the asset directly. The discussion explains how mining machines work, why miners join pools, and how rewards are shared.
(06:00) Bitcoin Mining as a Tax Strategy
Mining equipment may qualify for bonus depreciation, creating an upfront deduction while the business produces Bitcoin over time. The conversation explores how this fits into a broader strategy of purchasing income-producing assets.
(08:00) Material Participation and Documentation
Using mining losses to offset wages or other business income involves more than purchasing equipment. The discussion covers material participation, tracking business activities, and planning ahead to meet the relevant requirements.
(13:00) Equipment Costs and the Four-Year Commitment
Colin outlines packages that combine mining machines, hosting, and electricity over four years. They discuss upfront costs, operating arrangements, and why the value of the Bitcoin earned can fluctuate.
(17:00) How Much of the Investment Is Deductible?
The full package price isn’t presented as a first-year deduction. Using a $100,000 example, they discuss an estimated $70,000 first-year deduction, with remaining electricity expenses spread over later years.
(19:00) Bitcoin Halving and Long-Term Returns
Mining rewards change over time, and Colin explains why his approach depends heavily on Bitcoin appreciating. The discussion highlights the importance of evaluating potential returns beyond the initial tax benefit.
(21:00) What Happens After the Mining Contract Ends?
As the four-year agreement ends, owners face decisions about older equipment and whether to purchase new machines. Colin discusses replacement, disposal, and the potential tax implications of selling depreciated equipment.
(24:00) Accumulating Bitcoin Over Time
Mining produces Bitcoin gradually rather than through a single purchase. Colin explains his preference for holding the Bitcoin earned and taking a long-term approach to price fluctuations.
(26:00) Understanding the Risks of Bitcoin Mining
Bitcoin prices, network difficulty, changing rewards, and equipment failures can affect results. The conversation also covers hosting fees, electricity contracts, downtime, and questions to ask when evaluating a provider.
(31:00) Who Might Be a Good Fit for This Strategy?
The discussion focuses on high-income business owners who can commit funds for several years and tolerate volatility. It closes with the importance of participation requirements, documentation, and building a legitimate business strategy.
Podcast Host:
Mike Jesowshek, CPA – Founder and Host of Small Business Tax Savings Podcast
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