Bitcoin mining isn’t just about hardware and hash power — it’s also an accounting and tax strategy opportunity. By strategically managing how electricity is tracked, allocated, and capitalized into the cost basis of mined Bitcoin, miners can create legitimate losses and deductions that offset other business income. This guide brings together practical guidance on electricity cost tracking, capitalization, specific identification accounting, tax loss harvesting, and structuring around software businesses funded by mining-related activities.
Capitalizing Electricity in Bitcoin Mining
Electricity used in Bitcoin mining can be either expensed or capitalized. The default is to deduct it as an operating expense, but you can capitalize it into the basis of the Bitcoin mined, provided you use a consistent and well-documented method. You may choose to capitalize only a portion of electricity costs (e.g., 60% for production rigs), while expensing the rest (e.g., admin usage, test rigs). This split is valid and beneficial when done consistently with clear supporting logs.
When Is Bitcoin “Earned”?
Bitcoin is considered earned — and thus taxable — at the moment you gain “dominion and control” over it. For solo miners, this is when the block reward is credited to your wallet. For pool miners, it’s when your payout is distributed. At that time, the fair market value (FMV) in USD becomes the amount of income recognized, and that same FMV becomes your cost basis unless you’ve capitalized expenses into it.
Specific Identification and Tax Loss Harvesting
To optimize gains or harvest losses, miners should use specific identification accounting. This means you must track exactly which BTC lots are being sold, their original basis (including any capitalized costs), and their acquisition dates. Without this, you’re defaulted to FIFO (First-In, First-Out), which may reduce your flexibility. Specific ID lets you sell high-basis BTC for losses while keeping low-basis BTC for gains.
Importantly, as of 2025, the wash sale rule does not apply to crypto. This allows you to sell BTC at a loss, recognize that loss, and repurchase the BTC immediately without disallowing the deduction. This creates a unique tax planning opportunity for reinvestment or offsetting other gains.
Tracking Electricity in Google Sheets
Electricity costs can be tracked manually or semi-automatically using Google Sheets. Input rig wattage, runtime, and cost per kWh to calculate total electricity usage and allocate it per BTC earned. You can also integrate mining pool data and use a blend of submetering and utility bill breakdowns to track usage more precisely. Green Button data from utilities or smart meters like Shelly EM or Emporia Vue can feed data into CSVs that sync with Google Sheets.
Integration from Utility and Submeter Data
Power companies may allow CSV downloads or access to Green Button standardized energy data, while smart submeters provide kWh data per circuit or device. These data sources can be merged into a central tracking system using CSVs or even MQTT/REST APIs if more automation is desired. Tools like Node-RED, Google Apps Script, and Zapier help with automating this process to ensure rig-by-rig electricity tracking aligns with payout intervals.
Crypto Fees, Basis, and Cost Management
Fees paid during BTC transactions — such as mining pool fees, gas fees, and transfer costs — should be added to the basis of the asset if they’re related to acquisition or sale. If you’re transferring BTC to another wallet, those fees are not added to basis, but if you’re selling, trading, or earning it via mining, relevant fees increase the cost basis, reducing potential capital gains. Consistency is key.
When mining Bitcoin, you must include the FMV at the moment of receipt as income. Capitalizing electricity into the basis defers that portion of the income, helping balance income recognition with actual operational cost.
Tax Shield and Strategic Loss Harvesting for SaaS Offsets
A strategic benefit of combining BTC mining with other businesses, like SaaS, is the ability to use mined BTC losses to offset profits from other ventures. For example, if you mine Bitcoin and recognize a loss upon sale (after capitalizing electricity), you may be able to use that capital loss to offset income from a profitable business such as DocupletionForms.com.
Here’s how it works: after mining and recognizing taxable income based on FMV, if the value of BTC drops and you sell it, you can harvest the loss. Then, you can repurchase BTC immediately (no wash sale restriction), and even borrow against it using platforms or private agreements. This borrowed capital can fund development and marketing of your SaaS while the loss offsets your taxable profit.
Structuring this properly means pairing strong recordkeeping with legal separation between entities (e.g., holding BTC in a trust or LLC and operating SaaS from another). As long as you avoid constructive receipt of borrowed BTC, and interest paid on the borrowed amount is reasonable, you maintain clear tax separation while gaining liquidity and shielding income using mined asset losses. This approach combines crypto mining, asset-based lending, and SaaS entrepreneurship into one tightly controlled tax-optimized strategy.
