Client Profile
| Industry | Cryptocurrency Mining |
| Annual Revenue | $920,000 |
| Entity Type | C-Corporation |
| State | Wyoming |
| Key Metric | $380K in mining rigs + $220K solar installation |
| Annual Tax Savings | $72,000 |
The Problem
This client operated a cryptocurrency mining facility generating $920,000 in annual revenue. The operation was structured as a single-member LLC with full self-employment tax exposure. The facility consumed approximately $18,000 per month in electricity, and the owner had recently purchased $380,000 in new ASIC mining rigs and was considering a $220,000 commercial solar installation.
The prior accountant had placed the mining rigs on standard 5-year MACRS depreciation and had not discussed entity optimization, C-Corp election, or energy tax credits. The owner was paying an effective tax rate above 45%.
AE Tax Strategy
1. C-Corporation Election Under IRC §11(b)
We converted the LLC to a C-Corporation at the flat 21% rate. By retaining $240,000 inside the C-Corp for equipment replacement reserves, we reduced the tax rate on those earnings from 37% to 21%. Rate arbitrage savings: $38,400 annually.
2. Section 179 Expensing on Mining Rigs Under IRC §179
We elected Section 179 on the $380,000 in ASIC mining rigs. Combined with bonus depreciation under IRC §168(k) on additional equipment ($85,000), first-year equipment deductions totaled $465,000, producing approximately $17,600 in additional tax savings.
3. Solar Investment Tax Credit Under IRC §48
The $220,000 solar installation qualified for the 30% ITC under IRC §48 ($66,000 credit). Under IRC §50(c), the depreciable basis was reduced by 50% of the credit, and the remaining basis qualified for bonus depreciation. Net incremental benefit from optimized structuring: approximately $16,000.
Before & After Comparison
| Tax Category | Before (Schedule C) | After (C-Corp) | Savings |
|---|---|---|---|
| Rate Arbitrage (Retained Earnings) | $88,800 | $50,400 | $38,400 |
| Equipment Depreciation (Sec 179) | $16,000 | $33,600 | $17,600 |
| Solar ITC + Optimization | $0 | $16,000 | $16,000 |
| Total | $104,800 | $100,000* | $72,000 |
*After column reflects reduced total tax liability.
Key Takeaways
- Crypto mining operations with significant equipment costs and reinvestment needs are strong candidates for C-Corp election due to the retained earnings rate advantage at 21% vs. individual rates up to 37%.
- Section 179 expensing allows immediate deduction of mining rig purchases rather than spreading them over 5 years.
- The solar ITC at 30% combined with bonus depreciation on the adjusted basis creates a powerful dual benefit for energy-intensive operations.
- Crypto mining income is ordinary income, not capital gains — entity selection and deduction timing are the primary planning levers available.