I've been trying to figure out how taxes work when mining cryptocurrency (Currently I reside in California). If I took a family loan of $50k to build a mining farm that is currently at my house in its own separate room built for this only, and that farm makes currently $190 a day in crypto. Do I have to pay income tax when I sell my coins to pay off my 50k loan? Or only when I break even on my 50k loan (after that it would be considered a "profit")? So far I only understand that income tax is collected if you have a net positive for the year. But if I don't break even for this year then I don't need to pay income tax? And if I don't need to pay income tax, how do I report to the irs that the money received from mining crypto was put towards the loan to pay it off? My initial thoughts is this 50k spent on materials and hardware will be deducted as a business expense on a schedul 1040-c form and monthly electricity used will be deducted as a business expense as well throughout the year. Plus the income from mining will be used to pay off the 50k entirely, non of that touches my pocket for spending on anything else. My final question for this if I do have to pay income tax on mining income, will I have to pay quarterly or yearly income tax in California? I hope this isn't too confusing to understand but it's the best I can think of on how to explain my situation.
submitted by /u/__420_