US Crypto Miners: 30% Excise Tax on Electricity Costs

US Crypto Miners to Face 30% Excise Tax

A Department of the Treasury supplementary budget explainer paper released on March 9th indicates that US-based best crypto miners will likely face a 30% excise tax on their electricity costs. The tax is proposed to be implemented after December 31 and will be gradually phased in over three years at a rate of 10% per year until it reaches the maximum tax rate of 30% in the third year.

Under the new proposal requirements, best crypto miners  will have to report how much electricity they use and the type of power used. The tax will also apply to crypto miners who acquire their electricity needs off-grid, and they will be mandated to estimate the electricity costs generated by any electricity-generating plant.

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The Treasury justifies the need for taxation by claiming that an excise tax on electricity usage by digital asset miners could help reduce mining activity and its associated environmental impacts and other harms. The increase in energy consumption attributable to the growth of digital asset mining has negative environmental effects and can also increase energy prices for those sharing an electricity grid with digital asset miners.

Besides the proposed best crypto miners taxation, US President Joe Biden’s latest 2024 budget proposal includes a crackdown on crypto wash sales while also suggesting changes to crypto tax treatment with the aim of raising around $24 billion. The new budget proposal involves a provision to end the tax-loss harvesting strategy, which involves a crypto trader deliberately selling an investment that has lost value for tax purposes.

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The new proposed tax regime on crypto miners is expected to hit them harder as they try to navigate their way through the bear market, with lower Bitcoin prices and higher energy prices making mining as a business increasingly unsustainable. The unrelenting nature of best crypto miners  forced Core Scientific Inc, one of the biggest publicly traded cryptocurrency mining companies in the United States, to file for Chapter 11 bankruptcy protection in December 2022.