Bitcoin Mining Tax Strategy: Maximize 2025 Deductions

Bitcoin miners just received a significant boost from the IRS and if you’re not capitalizing on it, you could be leaving substantial money on the table. 

On July 4th, the U.S. government passed the “One Big Beautiful Bill” (OBBB), restoring 100% bonus depreciation for qualifying equipment purchases. This change is permanent, reversing the phasedown introduced in the 2017 Tax Cuts and Jobs Act. For Bitcoin miners, that means the ability to fully expense major equipment purchases like ASICs, servers, and cooling systems in the year they’re placed in service, drastically improving operational cash flow. 

In this edition of TNF Takes, The Network Firm's Noah Buxton and CPA Nick Ward break down what this means for your mining operation, the smartest ways to use the law, and the common pitfalls that could cost you.  

What Changed: 100% Bonus Depreciation is Back… And It’s Permanent

Before the OBBB, miners were subject to a phasedown schedule that would fully sunset in 2026. Now, the new law makes 100% bonus depreciation permanent for qualifying property. That includes your ASICs, servers, power units, and cooling infrastructure. Basically, anything that directly powers hashrate. 

Key takeaway: Real estate still doesn’t qualify. But if it’s hardware used in the mining operation itself, it likely does. 

Why This Matters for Miners 

This change creates a powerful lever for Bitcoin mining operations, both small and large: 

• Accelerated tax deductions: You can write off your entire ASIC fleet the same year it’s installed and powered on. 

• Improved cash flow: Reducing your tax liability means more liquidity to reinvest in equipment, pay down debt, or build a Bitcoin treasury. 

• Strategic fleet upgrades: If done correctly, you can out-hash the competition by reinvesting faster. 

But — and this is a big but — nuanced tax planning is required to avoid costly mistakes. 

The Strategic Advantage: Use Depreciation to Strengthen Your Balance Sheet

Here’s how it works: 

Say you purchase $250,000 in new ASICs. If they’re placed into service before year-end, you can depreciate the entire cost in that tax year. Depending on your tax bracket, that could be up to $75,000 in immediate tax savings. 

With bonus depreciation: 

• You don't need to wait years to realize the value of the purchase. 

• You can reinvest that savings right back into operations or equipment. 

• However, that value depends on how you structure the purchase and what type of entity you operate. 

Entity Structure Matters: C-Corp vs. LLC 

How you’re taxed impacts how bonus depreciation affects you. Here’s why: 

C-Corporation 

• Can take full advantage of bonus depreciation. 

• Net operating losses (NOLs) can be carried forward but are now limited to 80% of future taxable income. 

• No longer eligible for carryback under the new law. 

LLC or Partnership 

Pass-through entities present more complex scenarios: 

• Passive loss limitations 

• At-risk rules 

• Capital account considerations 

Depreciation flows through to partners via K-1s and may not be fully usable, depending on the partner’s overall tax profile. 

Planning Tip: Many miners default to the pass-through structure without realizing the complexity it adds when electing 100% bonus depreciation. It could lead to sequestered losses that offer limited benefit. 

Section 179 vs. Bonus Depreciation: Know the Difference

Section 179 is another tax provision miners might already be familiar with, as it allows for immediate expensing of qualifying purchases. However, it has two key limitations: 

• It can’t create a net loss. 

• It has a cap (now raised to $2.5 million under the new law). 

• Where possible, you can stack Section 179 and bonus depreciation: 

• Use Section 179 to offset income up to your profit line. 

Use bonus depreciation to create or deepen a loss (for C-Corps) or strategically allocate depreciation among partners (for LLCs). 

Timing Is Everything: CapEx Planning and Depreciation Elections 

Many miners are planning Q4 expansions. Here’s the catch: 

If you place assets into service before year-end, you can take 100% depreciation now. But if you're nearing breakeven or a small profit, that could push you into NOL territory, where those losses may not be immediately useful. 

Instead, strategically staging deployments across tax years could maximize value. 

Other scenarios where timing matters: 

• You finance equipment: Make sure the tax savings outpace your debt service costs. 

• You resell frequently: Bonus depreciation may lead to depreciation recapture, resulting in unexpected gains. 

Don’t Overlook State Taxes 

Federal tax treatment doesn't always match the states. Some conform to federal bonus depreciation rules, but others don’t. 

Also consider: 

• Franchise taxes in states like Texas are often based on gross receipts, not net income. So even with tax losses, you might still owe state-level taxes. 

• Planning at the state and federal level together can help you avoid unexpected liabilities. 

Crypto Sales and Treasury Considerations 

Most miners are frequent sellers of BTC, whether to fund operations or cover debt. That means each sale triggers a taxable event. 

Mining companies should: 

• Track all crypto activity and reconcile gains/losses accurately. 

• Plan depreciation elections in light of both ordinary income (from mining) and capital gains/losses (from BTC sales). 

If you're building a Bitcoin treasury, depreciation savings could help fund that without dipping into operating capital. But you'll eventually sell, and when you do, you’ll need to be prepared for capital gains tax on those transactions. 

TLDR: Your Action Plan

If you’re a Bitcoin miner, here’s what you should do next: 

Review your entity structure — C-Corp vs. partnership has big implications. 

Build a detailed CapEx schedule — Know when you’ll place assets into service. 

Coordinate tax and operational planning — Timing is key to maximizing savings. 

Track crypto activity — BTC sales are taxable and affect your overall strategy. 

Maintain clear fixed asset records — Proper classification is essential for elections. 

Consult your tax advisor — One-size-fits-all does NOT apply here. 

Final Thoughts: Smart Miners Plan Ahead 

This new tax law is more than a headline; it's a real opportunity to supercharge your cash flow and reinvest faster. But like any powerful tool, it must be used wisely. 

Smart miners: 

• Model their profits. 

• Track resale timelines. 

• Align deductions with the business and investor goals. 

At The Network Firm, we help miners turn complexity into opportunity. Whether you’re just starting or operating at scale, a thoughtful tax strategy is critical to long-term success. 

Noah Buxton, CEO

Author Bio:
Noah has more than 15 years of attest, legal, IT and regulatory compliance experience. Noah sets the strategy and oversees execution of strategy at The Network Firm. While Noah advises public blockchain and virtual currency clients on myriad industry-specific issues, his expertise lies in licensing, IT & Security matters as well as attest and assurance reporting for Exchanges, Asset-backed token issuers, lenders and blockchain and cryptocurrency startups.

Noah is a member of the American Institute of Certified Public Accountants (AICPA), Florida Institute of Certified Public Accountants (FICPA), and a former member of the California Bar Association and International Association of Privacy Professionals (IAPP). Noah has served in active roles for working groups with the AICPA and Chamber of Digital Commerce (CODC) since 2018 and hods a current seat on the Steering Committee for C4’s Cryptocurrency Security Standard (CCSS).

Connect with Noah Buxton on LinkedIn/Twitter for more expert advice.