Introduction

Cryptocurrency’s boom has created a fresh avenue for passive income, and leasing mining rigs is a leading method. 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 hardware unit—usually a high‑performance graphics card or ASIC miner—owned by a person or company and rented out to a third party for a set duration. 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. The IRS treats it as rental income under Section 469, which requires you to report the gross rental receipts on your tax 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

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

Electricity expenses borne by the lessee (usually passed through to the owner as a distinct fee).

Costs for maintaining or repairing the rig (e.g., replacing a faulty fan).

Premiums for insurance covering loss or damage to the rig.

Loan interest paid for acquiring the rig.

Depreciation or amortization of the rig’s cost basis.

Depreciation of Mining Rigs

Mining rigs are considered depreciable property because they have a finite useful life and lose value over time. You can reclaim the rig’s cost via depreciation, lowering taxable income as permitted by the IRS. 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

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. However, the amount expensed is subject to a phase‑out if your total equipment purchases exceed a threshold ($2.89 million in 2024).

Bonus Depreciation

Following the Tax Cuts and Jobs Act, 法人 税金対策 問い合わせ 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. Choosing bonus depreciation locks you into it; you can’t later elect MACRS depreciation for that asset.

Self‑Employment Tax Considerations

Typically, rental earnings avoid self‑employment tax as they’re classified as 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 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 passive losses exceed passive income for the year, the excess is suspended and carried forward. But a special rule exists for 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. 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 – If you expect to retain earnings and reinvest profits, a C‑corp may allow you to defer personal income tax until you distribute dividends.

3. Track All Expenses – Document every maintenance, insurance, and other expense meticulously to cut 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 – If mining rewards are treated as rental income, a different tax outcome may ensue.

Forgetting Depreciation – Omitting depreciation or Section 179 may increase 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 grasping rental income reporting, leveraging depreciation and expensing, and monitoring passive activity and self‑employment rules, you can preserve more of your earnings. Always consult a tax professional experienced in crypto and equipment leasing to design a strategy that matches your situation.