The One Big Beautiful Bill Act signed into law on July 4, 2025 permanently restored 100% bonus depreciation for qualifying crypto mining equipment placed in service after January 19, 2025. The restoration reversed a scheduled phasedown under the 2017 Tax Cuts and Jobs Act that had reduced the deduction to 60% by tax year 2024. Under the restored rule, an ASIC miner purchasing $90,000 in equipment generates a $90,000 first-year deduction, compared with the 20% rate that applied before the legislation, according to analysis from Blockspace and Simple Mining. The provision applies to tangible personal property with a MACRS recovery period of 20 years or less, including ASIC miners, power distribution units, cooling systems, transformers, and networking gear in the five-year MACRS class.
One Big Beautiful Bill Act Restores 100% Bonus Depreciation for Mining Hardware
Under IRC Section 168(k), tangible personal property with a MACRS recovery period of 20 years or less qualifies for bonus depreciation, according to analysis from Blockspace. ASIC miners, power distribution units, cooling systems, transformers, and networking gear all fall within the five-year MACRS class. Containers and skid-mounted generators sit in the seven-year class. Both qualify for full first-year expensing under the restored rule.
A miner purchasing 10 Antminer S21 XP Hydro units at $9,000 each generates $90,000 in first-year deductions, Simple Mining reported in its May 2026 guide. When combined with hosting and electricity costs, a properly structured mining business can show a paper loss in year one while generating real Bitcoin income. That paper loss flows through to the operator's personal return if the entity is a sole proprietorship or pass-through structure.
Brandon Bailey, co-founder of Second Gate Advisory, noted that smaller miners in the bootstrapping phase stand to benefit the most from the restored provision, Blockspace reported. Large public miners often already carry depreciation schedules across massive fleets. For an operator purchasing their first batch of machines, the full write-off in year one can eliminate their federal tax liability on mining income entirely.
The restored rate creates an asymmetric incentive. Miners can deduct the full cost of hardware immediately, but if Bitcoin's price drops and the machines underperform, the tax benefit still stands while the economic return evaporates. The IRS does not claw back depreciation when a machine produces less revenue than expected.
Section 179 Deduction Limit Raised to $2.5 Million for 2025
The One Big Beautiful Bill Act raised the Section 179 deduction limit to $2.5 million for 2025, BitFuFu noted in its August 2025 analysis. Section 179 applies only to taxable income and cannot create or increase a net loss. Bonus depreciation carries no such cap and can generate losses that offset other income streams.
For a miner with $200,000 in hardware purchases and $100,000 in mining income, bonus depreciation results in a $100,000 loss that flows through to the personal return, subject to the material participation rules. Section 179 would cap the deduction at $100,000, the amount of taxable business income. The excess $100,000 would carry forward under Section 179 but would be immediately deductible under bonus depreciation.
Most operators default to bonus depreciation because loss creation is where the real planning leverage exists, Simple Mining's guide explained. Section 179 makes more sense for very small operations where the miner does not want to generate a paper loss or where the hardware cost falls well within the income threshold.
IRS Material Participation Tests Determine Loss Classification Under Section 469
IRC Section 469 requires miners to meet at least one of seven material participation tests to treat losses as active. The most commonly cited test requires 500 hours of participation in the activity during the tax year, Weaver LLP explained in a January 2026 analysis.
A second test allows qualification with more than 100 hours of participation if no other individual participates more. For hosted mining operations where a third party manages the machines, meeting these thresholds requires documented involvement in monitoring, decision-making, and maintenance oversight.
Beau Turner, CEO of Abundant Mines, told TheStreet in February 2026 that his company structures arrangements so clients own the equipment outright. "They actually purchase the machines. They are the owner of the machines that they got through us," Turner stated. "We are just the managers and the operators. The equipment lives on that person or that entity's balance sheet, and they get to take all the depreciation."
Entity structure amplifies the value of the deduction. An S-Corp election with a reasonable W-2 salary can save roughly $1,650 in self-employment tax on $38,000 of profit and unlocks the qualified business income deduction, Simple Mining's analysis estimated.
State Conformity Varies for Federal Bonus Depreciation Treatment
Not every state follows the federal 100% rate, and some states decoupled from TCJA bonus depreciation years ago and require multi-year MACRS schedules regardless of the federal treatment. BitFuFu's analysis warned that miners should check local state tax authorities to gauge conformity before planning around full first-year expensing.
Miners should maintain purchase invoices, proof of installation date, hash logs showing the equipment was placed in service, and records of hours spent on mining activity. CoinTracker's 2026 guide recommended keeping exchange invoices, on-chain transaction IDs, energy bills, and depreciation schedules for at least three years, and up to seven years for certain loss claims.
Act Eliminates Production Tax Credits for Renewable Projects After December 31, 2027
The One Big Beautiful Bill Act eliminated production and investment tax credits for wind and solar projects placed in service after December 31, 2027, unless construction begins by July 4, 2026, Blockspace reported. For miners operating on renewable power, this provision could raise future electricity costs in renewable-heavy grids like ERCOT's West Texas zone. The net effect on mining profitability depends on location and power contract structure.
FAQ
What is bonus depreciation for crypto mining equipment?
Bonus depreciation allows miners to deduct 100% of qualifying ASIC and infrastructure costs in the year the equipment is placed in service, rather than spreading the deductions over five MACRS years.
Does the One Big Beautiful Bill affect mining hardware deductions?
Yes, the Act permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025, reversing a phasedown that had reduced the rate to 60% by 2024.
Can crypto mining depreciation offset W-2 wages?
Only if the mining activity is classified as active under Section 469, which requires meeting one of seven material participation tests, most commonly the 500-hour annual participation threshold.
