[tedunangst]

You owe tax on income regardless of the form. If your employer gives you stock, you owe tax based on the stock's value the day you get it. Capital gains (or losses) mostly only applies when you sell the stock, and only to the difference in value. Same deal for bitcoins. Hell, if you're caller #9 and you just won the two week cruise, you're getting a fat tax bill and cruises aren't cash either.

[yebyen]

Ahm... but if you paid cash for the bitcoins, you don't owe any tax on it, right... until they appreciate in value, then it's capital gains?

And then, only if you actually cashed out, right? If you leave them as bitcoins and the value drops below what you paid, now you've got a loss and maybe deduction instead...

It would make sense that you should pay taxes on mining income (if they can find you).

[zargon]

If you paid cash for the cash you received in the mail, it wouldn't be income either, would it? (though it makes little sense.)

Most people earning income in bitcoin probably aren't doing it by mining, especially after ASIC arrives. Just to point out that mining is only one of many ways to earn bitcoin income.

[yebyen]

Right, there's also arbitrage trading on markets which have fluctuating market rates, plus regular buying and selling over longer periods of times, transaction fees (both from mining and from trading), and simply accepting Bitcoin as payment for services.

I am not so sure that ASIC will kill the small-time mining scene, the low-end ASIC miners are cheaper and less power hungry than video cards (though you can't play games on them), it will just mean that if you want to mine bitcoins, you'll have to get one (or more), and you can't rely on your video card anymore. So a lot of people will be pushed out.