Introduction

The surge in cryptocurrency has unveiled a new path to passive earnings, with renting mining rigs being a top choice. Instead of buying and running a mining operation yourself, investors can lease their rigs to other miners and collect a steady stream of rental income. While this can be an attractive investment, it comes with a set of tax rules that can be confusing if you’re not familiar with them. In this piece we examine the main tax consequences for those renting out mining rigs, including income recognition, depreciation, Section 179, passive activity rules, and beyond.

What Is a Rental Mining Rig?

A rental mining rig is a piece of hardware—typically a powerful graphics card or ASIC miner—owned by an individual or business that is leased to a third party for a fixed period. The lessee operates the rig, paying the owner a fee (often per day, week, or month) in exchange for the right to use the equipment. The owner does not provide electricity or maintenance; the lessee handles those operational details. In tax terms, the owner’s connection to the rig mirrors any other rental property: owning the asset, earning rental income, and being entitled to related deductions.

Income Recognition

Rental income from mining rigs is considered ordinary income for tax purposes. Under Section 469, the IRS regards it as rental income, mandating the reporting of gross receipts on your return. Should you rent a rig at $50 daily for 30 days, you’re required to report $1,500 of rental income for that month. This income is reported on Schedule E (Supplemental Income and Loss) if you file as an individual, or on the appropriate line of your business return (e.g., Form 1120 if you operate through a corporation).

Deductible Expenses

Like any rental activity, you can deduct ordinary and necessary expenses that are directly related to maintaining and operating the rig. Typical deductible items include:

The electricity cost incurred by the lessee (commonly passed to the owner as a separate charge).

Maintenance or repair costs for the rig (e.g., replacing a faulty fan).

Insurance costs that safeguard the rig from loss or damage.

Loan interest paid for acquiring the rig.

Depreciation or amortization of the rig’s purchase price.

Depreciation of Mining Rigs

Mining rigs qualify as depreciable assets due to their limited useful life and depreciation over time. Depreciation lets you recover the rig’s cost and cut taxable income, per IRS rules. Tangible property typically uses the Modified Accelerated Cost Recovery System (MACRS) for depreciation. Most computer equipment enjoys a 5‑year recovery period, with options for straight‑line or declining balance depreciation.

Section 179 Expensing

If you purchase a mining rig in the same year you place it in service, you may elect to expense the entire cost under Section 179, up to the statutory limit ($1.16 million in 2024). You can deduct the complete purchase price in the year you acquire it, bypassing the five‑year spread. Yet, if your combined equipment purchases exceed $2.89 million in 2024, the expensed amount phases out.

Bonus Depreciation

Following the Tax Cuts and Jobs Act, you can also claim 100 % bonus depreciation on qualifying property in the year it is placed in service. This allows you to write off the entire cost of the rig immediately, provided you elect to do so. After selecting bonus depreciation for an asset, you’re barred from switching to MACRS depreciation later.

Self‑Employment Tax Considerations

Typically, rental earnings avoid self‑employment tax as they’re classified as passive income. Yet if you take an active role in managing the mine—supplying electricity, maintenance, or other services beyond leasing—the income might be considered self‑employment income. The determining factor 法人 税金対策 問い合わせ is whether the services are essential to the operation. When the lessee manages all operational elements, the income stays passive. If you also provide significant operational support, a portion of the income may be subject to self‑employment tax.

Passive Activity Rules

Rental real estate and equipment fall under passive activities per the passive activity loss rules. Thus, passive losses can offset only passive income. If you have more passive losses than passive income in a year, the excess losses are suspended and carried forward to future years. Nevertheless, a special provision applies to real estate professionals and active participants. Should you materially participate—working at least 500 hours a year—you might deduct losses against other income.

Reporting on a Partnership or LLC

A common strategy is to create a partnership or LLC to hold the rigs and share rental income among members. Each member then reports their portion of income and deductions on Schedule K‑1. Form 1065 is filed by the partnership, and its assets are depreciated on the partnership books. Section 179 or bonus depreciation may be elected by the partnership at the entity level.

Tax Planning Strategies

1. Maximize Immediate Deductions – If you intend to sell the rig soon, using bonus depreciation or Section 179 can yield quick tax benefits.

2. Consider a C‑Corporation – Anticipating retained earnings and reinvestment? A C‑corp can defer personal tax until dividends are paid.

3. Track All Expenses – Keep meticulous record of all maintenance, insurance, and other outlays. These can significantly reduce taxable rental income.

4. Separate Operational Costs – If the lessee handles electricity, record those expenses separately so they can be passed through and preserve passive status.

5. Use Lease Agreements – A written lease clarifies the nature of the rental relationship and can help demonstrate passive status to the IRS.

Common Pitfalls

Misclassifying Income – Classifying mining rewards as rental income may lead to alternate tax treatment.

Forgetting Depreciation – Neglecting depreciation or Section 179 can raise your taxable income.

Overlooking Passive Losses – Ignoring the carry‑forward of losses can lead to lost tax savings.

* Ignoring Self‑Employment Rules – Offering too much operational support can reclassify income as self‑employment.

Conclusion

Renting mining rigs gives investors a strong avenue for passive income, but the tax environment is intricate. By understanding how rental income is reported, maximizing depreciation and expensing options, and staying aware of passive activity and self‑employment rules, you can keep more of your earnings in your pocket. Always seek guidance from a tax expert versed in cryptocurrency and leasing to craft a plan suited to your circumstances.