Why not use an LLC to write of electric utilities expense from mining cryptocoins? Why won't this work?

Thanks user, this is good helpful feedback

Well, a write off only helps you if you have a profit in the first place. I can't imagine the IRS pays you negative tax on losses...

So at best you get out gross revenue minus expenses (power) and depreciation (rigs) as profits which you then have to pay taxes on.
Compare to if you do it privately: You get the same profit (revenue minus cost of power and rigs), but you probably don't pay any taxes...

Mining with an LLC seems stupid... am I missing something here?

The LLC and the write off effectively make the electricity cost 0. The profit comes from selling coins as they are mined. Depending on the earnings, the profit after corp. tax would be substantially greater than the marginal return after electric utility cost.

This assuming that the initial set up is done with cash and not on credit

I'm still not getting it. Let's run the numbers and for simplicity's sake discount initial set-up costs and depreciation and assume a 25% tax bracket:

>LLC
-10 Electricity
+50 Sales
-----
+40 Profit
-10 Tax
----
+30 Payout

>private mining
-10 Electricity
+50 Sales
-----
+40 Profit & Payout since you (illegally) don't declare anything

In order for a write-off to be effective, you have to first have some sort of profit. The only profit the LLC will have, are the sales of coins. Sure, writing off expenses allows you to lower your taxbase. But compared to not declaring the income at all since cryptocurrency is not tracable anyway, you still get out less (even without accounting for the operating cost of the LLC). Yes, if you were to declare your private crypto-trading profits anyway, then having a write-off for electricity would be nice - but you could have the same in personal income tax, no need to create an LLC.

It just doesn't make any sense. You still have to pay for electricity (negative cashflow). Deducting it from your profits as a write-off does not have a cashflow impact, it's just pushing numbers around. Being able to write-off electricity does not magically create you money.

>LLC
Not american, so no idea. But yeah, a company could work for write-offs. You write any business expenses off of your taxes, and since you're paying about 30% here that'd be enough to cover electricity and more.

>but you probably don't pay any taxes...
Eurofag here, yes you fucking better count on paying taxes off of it.

>Being able to write-off electricity does not magically create you money.
It doesn't, but you're taking it out of money you're legally bound to give away. Taxes are, to you as a business or individual, essentially lost money. They're just taken from you with no immediate benefit or gain. If you can use those to actually spend on your business, then it does help you out.

>+40 Profit & Payout since you (illegally) don't declare anything
Yeah, except in any civilized country they have easy ways to audit your bank account, keep track of shit you buy and WILL use this the moment you step out of line. If you do a single thing wrong anywhere, or they decide they want to look into you, you're fucked. You're not paying just the back-taxes, but also enormous sums for breaking the law. You'll lose your profit, and half your belongings with it.

Don't fuck around with the tax man unless you have to (i.e. you're selling drugs). To be honest, if you're going to do that, you might as well sell drugs. Dropship it, it's the modern way. Good luck.

TL;DR:
>It just doesn't make any sense.
Compared to doing illegal shit, paying taxes doesn't make sense, I agree.

I have to add, the IRS are one of the most powerful public government agencies. When the agencies can't get you, the police can't prosecute you, the IRS can still find dirt on you unless you're absolutely spotless. Someone mining bitcoins isn't absolutely spotless, and you will get caught buying a small item with cash you weren't supposed to have, leading to more investigations and ultimately a big fat check to the IRS for half of what you own.

Either sell drugs and launder the money (go all in), or don't fuck around. You don't casually screw the IRS/tax-man.

>you will get caught buying a small item with cash you weren't supposed to have
literally autism

>IRS monitor you buying a can of coke and know you only have 35c but the can costs 38c
>Must be undeclared income

You can explain into existence thousands of dollars each year - gifts, personal loans, old money stash from 10 years ago

>But in saying that, life's much more pleasant when you don't stress about all the lies you tell so why bother trying to cheat the tax man over such trivial amounts...

After having several drinks and considering it all..I must say...the most intelligent thing I have heard all day is driftwood art. If you have the desire for such.

Hint; I rent the beach where the driftwood washes up. It is always re cedar.

>he thinks business expenses offset capital gains
In order to offset expenses you have to treat your inflows as business activity, and therefore income. Presumably that's self-employment income, unless you go through the hassle of incorporating (which won't save you anything anyway).

>a write off only helps you if you have a profit in the first place
Business losses can be deducted against other income even if that business had no profit. However, the business has to be legitimate and have a legitimate profit purpose. Fail to generate any gains in repeated years and your activity is likely to be reclassified as "hobby," in which case the losses now cannot be deducted. And yes, this can happen to you retroactively,

People, if you're going to give tax advice, at least make it correct advice.

>Business losses can be deducted against other income even if that business had no profit.

Naturally. But OP wants to found an LLC for the single purpose of mining money. What "other income" would that LLC potentially have? That's why I think it's so badly thought-out.

if you never sell the coins, then restructure the business holdings later, no tax.