Own the equipment. Keep the depreciation. Let us run it.
You buy the equipment. We host and run it. Because you own real, depreciable equipment in a genuine trade or business, it can offset real income — the way a rental property or a truck fleet does.
Give your accountant something real to work with.
The 37-page tax strategy guide
Structures, frameworks, and worked examples, written so a professional can follow the mechanics and disagree with them specifically rather than dismissing the category.
Abundant Mines does not provide tax or legal advice. Confirm everything with your own CPA.
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before the tax code
What bitcoin mining actually is.
Bitcoin mining in one sentence: machines that get paid in Bitcoin for verifying transactions, powered mostly by electricity instead of workforce. Skip this if you already know it. A Bitcoin miner is a specialized computer, called an ASIC, that does one job: verify Bitcoin transactions. Do that job successfully and the network pays you in new bitcoin. There is no product to build, no customer to chase, no inventory.
The entire business comes down to one spread: what the electricity and hardware cost you, against what the bitcoin they earn is worth. Abundant Mines owns and operates six sites, with a seventh under construction, each with real, already-negotiated power contracts. You buy the machines. They run in our building, on our power, under our maintenance. The bitcoin they earn goes to your wallet, not ours. That is the entire business, before a single tax provision applies to it.
Book 30 minutes with our team.
The relevant code, in plain terms.
The provisions that make this work when the activity is a genuine trade or business, and the ones that stop it working when it is not.
| Code | Use case | What it does |
|---|---|---|
| 168(k) | Bonus depreciation | 100% first-year depreciation for qualified hardware placed in service during the tax year. Property must be ready and available for use, not merely on order. Permanent under current law, with no scheduled phase-down. |
| 179 | Immediate expensing | Immediate expensing where the business has net income. Cannot create or increase a net loss; excess carries forward. Annual caps are indexed and change year to year, so confirm the current figure. |
| MACRS | Accelerated depreciation | Standard five-year recovery period for ASICs and related equipment. |
| 469 | Material participation | Governs active versus passive. You materially participate when involvement is regular, continuous, and substantial under one of seven tests (Treas. Reg. §1.469-5T). |
| 461(l) | Excess business loss | Caps how much business loss can offset non-business income in a year. This is the limit most promotional material quietly omits and the one your CPA will raise first. |
| 1245 | Recapture on sale | Depreciation taken is recaptured as ordinary income up to original cost when the equipment is sold. Model the exit, not just the entry. |
| 162 | Trade or business | Defines when an activity rises to a trade or business, allowing ordinary and necessary expense deductions: power, hosting, travel, accounting. |
Annual limits and thresholds are indexed and change. Do not rely on a figure from an article without checking the current year. This table is a map, not advice.
State conformity varies. California, for example, does not conform to federal bonus depreciation under §168(k) — the federal benefit described above does not automatically flow through to a California return. Confirm your state’s treatment with your CPA before modeling the benefit.
Hosted mining can still be active. It is not automatic.
“Passive” depends on how the activity is structured and managed, not on who physically racks the machines. We provide power, space, and maintenance. You remain the business owner. Whether that clears the bar is a documented test, not an opinion, and it is where this decision actually gets decided.
Points toward active
- You own the equipment outright, not a partnership interest
- You make the business decisions: selection, upgrades, resale
- You control the hosting and power terms
- You bear the risk of uptime, price, and performance
- You manage cash flow and reinvestment
- You keep contemporaneous records of your involvement
Points away from it
- You are a limited partner in someone else’s operation
- Someone else makes every operating decision
- You cannot evidence regular, continuous involvement
- Your only activity is reading and listening to podcasts
- You are relying on an hour threshold you have not documented
- The structure was built to reach a conclusion rather than to reflect reality
Say this part out loud. Even with good documentation, the IRS can challenge active treatment on examination, and large losses offsetting wage income attract attention. Treat this as an area of elevated audit risk. Anyone who tells you otherwise is not someone you want structuring it.
What your CPA will actually ask to see.
Before your accountant signs off on treating this as depreciable equipment in a genuine trade or business, these are the eight terms they will want in writing.
Bring this to that conversation. It is the same information a CPA would put in a memo.
- Ownership
- Direct and outright. No revenue share, no partnership interest, no fund structure.
- Operations
- Fully managed. Power, deployment, monitoring, maintenance, labor, and repair under a flat monthly rate per machine.
- Custody
- Non-custodial. Production settles to a pool account and wallet you control. Pool optionality is yours.
- Insurance
- Replacement-value coverage on covered events, included rather than sold separately.
- Uptime
- 95% contractual guarantee, backed by our own fleet redirecting hashrate during service.
- Term
- Twelve-month hosting agreement. After that the equipment is yours to keep, relocate, or sell.
- Horizon
- Roughly a five-year economic life, with residual equipment value at exit.
- Jurisdiction
- Facilities owned and operated in Oregon, with no state sales tax on equipment.
Honest disqualifiers, not a sales pitch.
- You have no material participation and no other active trade or business. If you’re a pure W-2 earner, passive-activity loss limitations under §469 will likely prevent you from using the deduction against ordinary wage income the way this guide describes.
- You live in a state that doesn’t conform to federal bonus depreciation. California is the clearest example — the federal benefit above won’t flow through to your state return the same way.
- You’re looking to eliminate tax liability entirely. Depreciation defers and offsets, it doesn’t erase — and §1245 recapture claws some of it back on disposition.
We wrote the honest version of this because most guides oversell the passive-income angle and get people audited. Confirm everything with your own CPA, always.
Beau Turner & Christine Marie, Co-Founders, Abundant Mines