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. Although appealing, this strategy involves tax rules that can be perplexing without prior knowledge. This article breaks down the key tax implications for investors who rent out mining rigs, covering income recognition, depreciation, Section 179, passive activity rules, 節税対策 無料相談 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 lessee operates the rig, paying the owner a fee (often per day, week, or month) in exchange for the right to use the equipment. Electricity and maintenance are not supplied by the owner; the renter manages those operational aspects. Tax‑wise, the owner’s link to the rig parallels any other rental property: ownership of the asset, receipt of rental income, and eligibility for 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. For example, renting a rig at $50 a day for 30 days means you must report $1,500 of rental income 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

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

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.

Interest on a loan used to purchase the rig.

Depreciation or amortization of the rig’s purchase price.

Depreciation of Mining Rigs

Mining rigs are considered depreciable property because they have a finite useful life and lose value over time. The IRS allows you to recover the cost of the rig through depreciation, which reduces taxable income. Tangible property typically uses the Modified Accelerated Cost Recovery System (MACRS) for depreciation. For most computer equipment, the recovery period is 5 years, and you can use the straight‑line or declining balance method.

Section 179 Expensing

Buying a mining rig in the year you activate it allows you to expense the full cost via Section 179, capped at $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. It lets you deduct the full rig cost right away, if you choose to. Once you choose bonus depreciation for a particular asset, you cannot later elect to depreciate it under MACRS.

Self‑Employment Tax Considerations

Typically, rental earnings avoid self‑employment tax as they’re classified as passive income. But should you actively oversee the mining operation—offering electricity, maintenance, or additional services beyond leasing—the income could be classified as self‑employment income. The key test is whether the services performed are integral to the operation. If the lessee handles all operational aspects, the income remains passive. If you also provide significant operational support, a portion of the income may be subject to self‑employment tax.

Passive Activity Rules

Under the passive activity loss rules, 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

A common strategy is to create a partnership or LLC to hold the rigs and share rental income among members. Members report their share of income and deductions on Schedule K‑1. The partnership files Form 1065, and assets are usually depreciated on its books. The partnership can also choose Section 179 or bonus depreciation 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 – If you plan to keep profits and reinvest, a C‑corp can shift personal income tax to the dividend‑distribution stage.

3. Track All Expenses – Maintain detailed logs of maintenance, insurance, and other costs. This helps lower 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 – Neglecting depreciation or Section 179 can raise your taxable income.

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

Ignoring Self‑Employment Rules – Providing too much operational support can shift income into the self‑employment bracket.

Conclusion

Renting out mining rigs offers investors a compelling way to generate passive income, but the tax landscape is nuanced. By grasping rental income reporting, leveraging depreciation and expensing, and monitoring passive activity and self‑employment rules, you can preserve more of your earnings. Always seek guidance from a tax expert versed in cryptocurrency and leasing to craft a plan suited to your circumstances.