Why own miners rather than coins
Two arguments, and the conditions each one depends on.
Machines or coins
Mining wins on genuinely cheap power and a rising price. Buying the coin wins at a retail power rate, or if the price goes sideways while difficulty climbs.
The tax case
A miner is depreciable equipment; a held coin is not. Three mechanisms turn on that, and every one is gated on running a real business and on the machines being switched on that year.
Machines against simply buying bitcoin
If I have a hundred thousand dollars, do I buy machines or do I buy bitcoin? Anybody who answers that with one number, without asking your power price, is selling you something. Buying the coin fixes your bitcoin on day one and everything after that is the price. Buying machines gives you a stream of coins, bought at a cost your electricity sets, and a machine worth less every year.
When machines win
- Your power is genuinely cheap. This is the whole argument. Mining is a way of buying bitcoin at your marginal cost of production; if that cost is below the market price, you are buying at a discount, every day, without timing anything.
- The price rises. A fleet is leveraged to the price in a way a coin is not: the coins you have not mined yet are also worth more.
- You can use the depreciation. The second half of this page. It is worth real money and it is worth nothing if you do not qualify.
When buying the coin wins
- The price goes sideways and difficulty keeps climbing. Your output falls every fortnight whether or not you do anything, and the coin holder’s position does not.
- Your power is ordinary. At a retail rate the discount disappears and you are buying bitcoin at roughly the market price, with extra steps and a depreciating asset attached.
- You want the money back next year. Coins sell in an afternoon. A fleet is equipment, and equipment sells slowly and at a discount.
We are not going to print a crossover number here. It moves with your power price, your view on difficulty, your horizon and your tax rate, and a single figure on a sales page would be a figure chosen to flatter the thing being sold. The calculator runs both positions side by side from your own assumptions and tells you which period they cross in, if they do.
Compare the twoOpens with tax modelling switched on and a ten-machine fleet. Set your own power price, difficulty growth and horizon — those are the three inputs that decide the answer.
The tax case, and what it depends on
This is not tax advice, and we are not tax advisers. Proton Mining Group sells hosting and hardware. What follows describes how depreciation rules generally work so that you can have a useful conversation with a professional. It is not a statement that you qualify for anything, and you should not buy equipment on the strength of a web page.
It describes United States federal rules only. Our sites are planned in Canada and Nigeria as well as the United States, and the treatment of equipment differs between them in ways that matter. If you are not a US taxpayer, essentially none of the specifics below apply to you.
The genuine difference between a machine and a coin is this: a miner is equipment used in a business, and bitcoin is property you hold. Equipment can be depreciated. Property you hold cannot. That single distinction is where every tax argument for buying machines comes from, and it is also why every one of those arguments collapses if the activity is not really a business.
Every figure below renders as an orange placeholder. That is deliberate and it is the convention this whole site uses: these numbers change annually, and we would rather show you an obvious gap than a confident number that was right two years ago.
The threshold question: is it a business?
Nothing else on this page matters until this one is answered. Deductions for equipment are available to a trade or business. An activity carried on without a genuine profit motive is a hobby, and a hobby deducts nothing — the expenses are simply not deductible, while the income is still taxable.
The tests are facts-and-circumstances rather than a checkbox, and they look at things like whether you keep books, whether you have expertise or take advice, the time you put in, and whether the activity has ever made money. Buying machines and having somebody else run them does not by itself decide this either way, but it is exactly the fact pattern where the question gets asked.
Even inside a real business, losses can be limited if your participation is passive. Material participation is measured in hours and by tests with specific thresholds — broadly [MATERIAL PARTICIPATION HOURS] hours a year, among several alternatives. Hosted machines are the awkward case: somebody else racks them, cools them and fixes them. That is the service you are buying from us, and it is also the fact a professional will focus on.
We are flagging this because it is the condition most often left out of the sales pitch, not because it makes hosting a bad idea.
The three mechanisms
01
§179 expensing
capped, and limited by your taxable business income
Deduct the cost of qualifying equipment in the year it is placed in service, instead of spreading it over the asset’s life.
- Annual cap
- [§179 ANNUAL CAP]
- Phase-out begins at
- [PHASE-OUT THRESHOLD]
- Hard limit
- Cannot exceed your business’s taxable income for the year. It cannot create a loss.
- Disqualifies you
- Equipment not used in a trade or business; spending above the phase-out range; no taxable business income to absorb it.
The income limit is the one that catches people. A first-year buyer with a large purchase and little business income often cannot use most of it in year one.
02
Bonus depreciation
a percentage, and it is keyed to acquisition dates
A percentage of the cost deducted immediately, applied after §179 and without §179’s income limit — so unlike §179 it can create a loss.
- Current percentage
- [BONUS DEPRECIATION %]
- Depends on
- When the property was acquired and when it was placed in service. The percentage has changed repeatedly and is tied to dates, not to the tax year alone.
- Disqualifies you
- Property acquired outside the qualifying window; property not of a qualifying class.
This is the figure most likely to be quoted at you out of date, by us or by anyone else. Ask what date the percentage is keyed to.
03
MACRS, the ordinary schedule
the fallback, spread over the asset’s class life
If nothing is accelerated, the cost is recovered over the asset’s class life on a fixed schedule.
- Class life used for mining hardware
- [MACRS CLASS LIFE]
- Worth knowing
- The schedule may outlast the machine. Hardware that stops being economic in three years can still be carrying basis.
Two conditions that gate all three
Placed in service, not ordered
The deduction attaches to the year equipment is ready and available for its intended use — not the year you paid a deposit, not the year you signed, and not the year it shipped. A machine sitting in a crate in December is not placed in service in December.
This is the single most common way a year-end purchase fails to do what the buyer expected. If the timing is the point of the purchase, get the energisation date in writing before you pay.
Recapture on the way out
Depreciation lowers your basis in the machine. When you sell it, the gain up to the depreciation you took is generally recaptured and taxed as ordinary income rather than as a capital gain.
Depreciation is a deferral, not a discount. That is not an argument against it — money now is worth more than money later — but a comparison that treats it as free money is overstating the case.
And the part nobody mentions
Mined bitcoin is generally income when it is mined, at that day’s value, whether or not you sell it. That value becomes your basis, and gains above it are capital gains later. So a miner has a tax event on the way in that a coin buyer simply does not have — the coin buyer’s only event is on exit.
This cuts against the argument on this page, which is why it is on it. Depreciation is a real advantage; income recognition on every coin mined is a real cost, and the honest version of the comparison carries both. The calculator models both sides after tax, which is the only way the comparison means anything.
Questions we actually get
Can I deduct the whole cost of my miners in the first year?
Sometimes, through §179 or bonus depreciation or a combination. It depends on whether the activity is a trade or business, whether the machines were placed in service that year, how much taxable business income you have, and the current percentages. Any of those can reduce a first-year deduction to a fraction of what was expected, or to nothing.
Does hosting my machines with you change the tax treatment?
You still own the equipment, which is the fact the depreciation rules turn on. What hosting can affect is whether your participation is material or passive, and that affects how losses can be used. It is a real question and it is one for your accountant, not for us.
Is buying miners better than buying bitcoin?
It depends on your power price, your view on difficulty growth, your holding period and your tax position. Mining tends to win with genuinely cheap power and a rising price; simply holding tends to win with ordinary power and a flat price. Run both with your own numbers rather than trusting ours.
I am not a US taxpayer. Does any of this apply?
The specifics do not. Most jurisdictions have some form of capital allowance for business equipment, but the rates, the timing and the conditions are different everywhere. Our sites are planned in Canada and Nigeria as well as the United States, and we do not publish guidance for any of them.
When are the placeholder figures on this page going to be filled in?
When a professional has confirmed them against the current year. The numbers move annually and a stale figure on a page like this is worse than a visible gap, so they stay as placeholders until somebody qualified signs off.