Two taxable events, one coin.
Mined Bitcoin is taxed once when it arrives and again when it leaves. The second one is the event most people have not thought about, and the holding period is what decides the rate it attracts.
3 min readYour basis is set on the day the reward lands.
When a reward arrives it is ordinary income at its fair market value that day. The same figure becomes your cost basis in that coin. When you later dispose of it, the gain is the proceeds less that basis.
So the coin carries its own history. Whatever it was worth on arrival has already been taxed as income. The capital gain reaches only the movement after that point, which is why a coin sold shortly after it was mined usually produces a very small gain and occasionally a loss.
This is also why the arrival record matters so much. Basis you cannot evidence tends to get treated as basis you do not have, and the whole proceeds figure becomes gain.
The twelve month line.
The holding period begins the day after receipt. Where it ends decides which set of rates applies.
Twelve months or less
Short term. The gain is taxed at your ordinary income rates, the same rates that applied to the reward when it arrived.
More than twelve months
Long term. The gain is taxed at the preferential rates, which are 0%, 15% or 20% depending on your taxable income for the year.
The additional layer
Net investment income tax of 3.8% can apply on top for higher earners, depending on filing status and the composition of your income.
The thresholds move
The income bands that determine which long term rate applies are indexed annually. Use the figures for the year you are actually in, from your accountant, not a number from an article written in a different year.
Lot selection is a real decision, not a formality.
Mining does not produce one position. It produces a long series of small lots, each with its own arrival date and its own basis. When you sell part of a holding, which lots are treated as leaving changes the gain and can change whether it is short or long term.
Specific identification is available, but it requires records adequate to identify the units at the time of the disposal rather than a decision made afterwards at filing. Without that, you fall back to first in, first out, and the oldest and often lowest basis coins go first.
Basis tracking is now expected to be maintained wallet by wallet rather than pooled across everything you hold. If your coin sits in more than one place, that is a structural record keeping requirement and not a preference.
The holding period is not a free choice.
The rate difference is real, and you will find plenty of writing that stops there and calls it an easy win. It is not quite that, for two reasons.
The first is that holding is a position, not a tax election. Twelve months of exposure is twelve months of exposure, and the asset can be worth considerably less at the end of it. A lower rate applied to a smaller gain is not automatically the better outcome, and nobody can tell you in advance which way that resolves. The price side of this is set out on what can go wrong.
The second is that hosting has to be paid. Where the plan is to fund operating costs from production, disposals happen on a schedule set by the invoices rather than by the calendar, and a portion of the output leaves inside twelve months by design. That is a legitimate way to structure it. It just needs deciding deliberately rather than discovered at year end.
The rate is one input, not the answer.
I am wary of the version of this argument that treats the holding period as a lever you pull for a better result. It is one input among several, and the other inputs include an asset that moves and an operating cost that does not wait.
What I can give you is the position itself: what you hold, which lots it consists of, when each one arrived and at what basis, in a form your accountant can work from. The decision about when anything is sold is yours, and the tax consequence of it is theirs to compute. I would rather hand you both of those clearly than sell you a rule of thumb.
Find out whether this fits.
Thirty minutes on your capital, your timeline and your entity. If the numbers do not work I will say so on the call. You can also read how mining income is taxed and how it works.
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