Introduction

The rise of cryptocurrency has opened a new frontier for passive income, and one of the most popular ways to participate is by renting out mining rigs. Rather than purchasing and operating a mine yourself, investors can rent out their rigs to others and earn consistent rental revenue. 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. This article breaks down the key tax implications for investors who rent out mining rigs, covering income recognition, depreciation, Section 179, passive activity rules, and more.

What Is a Rental Mining Rig?

A mining rig available for rent is a hardware component—commonly a robust graphics card or ASIC miner—held by an owner and leased to a third party for a specified term. The renter operates the rig, compensating the owner with a fee—usually per day, week, or month—for the usage rights. The owner supplies no electricity or upkeep; these tasks are managed by the lessee. From a tax perspective, the owner’s relationship with the rig is similar to any other rental property: you own the asset, you receive rental income, and you can claim deductions related to that asset.

Income Recognition

Income generated from renting mining rigs is treated as ordinary income for tax reasons. According to Section 469, the IRS views it as rental income and demands the gross receipts be reported on your tax return. For example, renting a rig at $50 a day for 30 days means you must report $1,500 of rental income that month. Such income appears on Schedule E (Supplemental Income and Loss) for individuals, or on the relevant line of your business return (for instance, Form 1120 for corporations).

Deductible Expenses

Similar to any rental business, you can claim ordinary and necessary expenses directly linked to maintaining and running the rig. Typical deductions are:

The cost of electricity used by the lessee (often passed through to the owner as a separate charge).

Repair and maintenance expenses for the rig (such as replacing a defective fan).

Insurance premiums protecting the rig against loss or damage.

Loan interest paid for acquiring the rig.

Depreciation or amortization of the rig’s cost.

Depreciation of Mining Rigs

Mining rigs are treated as depreciable property owing to their finite useful life and gradual value loss. The IRS allows you to recover the cost of the rig through depreciation, which reduces taxable income. The standard depreciation method for tangible property is the Modified Accelerated Cost Recovery System (MACRS). For most computer equipment, the recovery period is 5 years, and you can use the straight‑line or declining balance method.

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). This means you can deduct the full purchase price in the year of acquisition, rather than spreading it over a 5‑year period. 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. You can take a full write‑off of the rig’s cost immediately, if you opt for it. After selecting bonus depreciation for an asset, you’re barred from switching to MACRS depreciation later.

Self‑Employment Tax Considerations

Rental income is generally not subject to self‑employment tax because it is considered passive income. However, if you actively manage the mining operation—such as providing electricity, maintenance, or other services beyond simply leasing the rig—some of that income may be deemed self‑employment income. The determining factor is whether the services are essential to the operation. If the lessee takes care of all operation, the income stays passive. Providing significant operational support can push part of the income into self‑employment tax territory.

Passive Activity Rules

Under the passive activity loss rules, 法人 税金対策 問い合わせ rental real estate and rental equipment are treated as passive activities. 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. If you materially participate in the rental, spending at least 500 hours annually, you may offset losses against other income.

Reporting on a Partnership or LLC

Investors often set up a partnership or LLC to own rigs and divide rental income between members. In this case, each member reports their share of income and deductions on Schedule K‑1. The partnership files Form 1065, and assets are usually depreciated on its 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 plan to sell the rig within a few years, taking bonus depreciation or Section 179 can provide immediate tax relief.

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 – Document every maintenance, insurance, and other expense meticulously to cut taxable rental income.

4. Separate Operational Costs – When the lessee covers electricity, list those costs separately to pass them through and maintain passive income.

5. Use Lease Agreements – Drafting a written lease clarifies the rental arrangement and supports passive status with the IRS.

Common Pitfalls

Misclassifying Income – Treating mining rewards as rental income can trigger different tax treatment.

Forgetting Depreciation – Skipping depreciation or Section 179 can lead to higher taxable income.

Overlooking Passive Losses – Failing to carry forward losses may cause you to miss tax benefits.

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

Conclusion

Renting out mining rigs offers investors a compelling way to generate passive income, but the tax landscape is nuanced. 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.