If you're not incorporated, business expenses are only deductible if they exceed 2% of AGI[0, p2], so for a hobbyist miner it is quite plausible that they can't write it off.
If you're just some average person, no, you aren't writing off the expenses. You should just add it to Schedule 1 line 8z "Other Income" and write "crypto mining" as what it is from. If you're just some average person, the actual tax on that money is going to be something like 10-15%.
You can save a lot of time and effort: If it's not profitable when you pay your taxes, it isn't profitable. It's a hobby.
Quick note since it wasn't totally clear from the sibling comments that this is totally wrong. The cited document is describing a completely different kind of "deduction" for a completely different reason and has nothing at all to do with the ability to "deduct" business costs from profits. The underlying principle is that only profits from business activity are taxable, not gross income.
In case anyone is wondering, the cited document discusses _unreimbursed_ _employee_ expenses. This means something like: you used your guest room as an office to perform remote work for your employer, and they didn't give you any rent for that space. In some times past you could actually pay less tax by declaring that you had rented your guest room to your employer but they hadn't paid you the rent, and so that's now a loss to you upon which you don't pay tax. This document says "nope, you can't do that any more".
However, my understanding is that all of this might be best handled as a Sole Proprietorship and filed using Schedule C - Profit and Loss from a Business.
Not tax advice, but I'm pretty sure you can just file it under a Schedule C as business income, and then you definitely can deduct the expenses from the business income with no 2% minimum.
They might not have known that. You’d be surprised how often people say “Taxes completely wiped out my profits becuase I didn’t realize I could deduct my expenses!” Also, in some industries, like marijuana distribution, you really can’t deduct a lot of your expenses.
Your ability to deduct business expenses using Schedule C has nothing to do with the standard deduction. (And if you don't treat it as a business expense, you probably can't deduct it no matter what.)
That's not how that works. For business expenses you put business income against expenses on schedule C. Only the net income is considered for taxes. Many people think they need to do something special to have a business but you don't. However, it can be a good idea to create a free EIN for the business and maintain real books (using ledger, for example, or by hand) and a separate checking account.
NC sells "unauthorized substance" tax stamps, which you can buy (in theory) anonymously with cash, to pay your taxes on income from illegal distribution.
Mostly it's an excuse to extract money from people who (obviously) didn't pay their drug taxes [1].
Seriously, there should be a way of challenging a conviction for not paying this tax (or any other tax), if the way to pay the tax is reasonably impossible to use for an average human.
I'd be fine with it if you could buy these stickers at any random store/kiosk/post office (like the tax stamps in Croatia that got phased out last year [1]), if you could mail-order them in advance, or if you could pay them online, and there was a written rule that not just makes it a misdemeanor for DoR staff to forward data, but outright poisons the whole investigation.
The IRS makes it really easy to just say you owe money and pay them, without saying much about why you owe them money. So there really isn't an excuse. I assume the NC system is for state taxes, not federal. For the IRS, you just put some numbers down and they usually won't ask for specific details. Later, if you get caught, the IRS will ask if you paid your taxes, and...if you did, they won't get you for tax evasion.
There is no “legal distribution” of marijuana in federal law, and it’s the federal law that’s most of the tax burden. The federal law simply does not allow you to deduct expenses on marijuana business.
But if you have a business selling whatever, you have expenses. Why does the federal tax agency even care what you're doing to make that money?
I assume federal law doesn't actively say it's illegal, and I assume federal law doesn't exhaustively list what can be an expense or not, so if your business is incurring a legitimate expense?
Further. Who decides what you are selling. Yes it may be marijuana in the box, but if there are other value added things, surely you could argue that that is an incidental ingredient, and you're really selling fancy packaging.
For a country where it's all about free enterprise etc. Things are half made awkward.
In the UK if you have a legitimate business expense related to your business you can expense it. And setting up a business basically involves getting a tax number to do your tax return.
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse. Some examples of Schedule I drugs are: heroin, lysergic acid diethylamide (LSD), marijuana (cannabis), 3,4-methylenedioxymethamphetamine (ecstasy), methaqualone, and peyote.
Those in the business of selling marijuana are doing so illegally in the hopes the federal government continues to not enforce the law. :(
So for example if you build a workshop in your garage and start making fine wood items, even if you sell them it may not be a business, and count as a hobby.
Usually the IRS is trying to find people with "perpetually money-losing businesses that are deducting each year" but you could get caught up in some cases.
[0] https://www.irs.gov/pub/irs-pdf/p529.pdf