IANAL but to my understanding its kind of a stretch to call it double-taxed.
Note: the below is assuming you're doing this mining activity as a private person and not setting it up as a separate legal entity like an LLC or something.
Simplifying, lets say 1BTC==$1USD at time of NiceHash payout, and you received 10 bitcoin. You'd then pay something like your regular income tax rate, lets say 30% on that. So the tax on mining income was $3. You'd still potentially have 10BTC, assuming you paid the tax with other dollars on hand instead of instantly selling.
Then crypto goes up from 1BTC==$1 to 1BTC==$1.50. Your crypto is now worth 10 * 1.5 = $15USD. When you go to sell, you don't pay tax on the full $15 you just pay the tax on the gains, $5. So you'd pay the capital gains tax, probably 15% to you, on that $5 so $0.75USD.
You don't pay the capital gains tax rate on the entire value of your crypto, only the gain in value. So from a USD perspective you didn't get double taxed. You had an income of $10, then you had an "income" of $5 when you realized the gains. That's two different taxable events, not a single one. If you exchanged the BTC to USD immediately at the distribution, you wouldn't of had a capital gains tax as you wouldn't have theoretically experienced any gains/losses on that distribution.
IANAL, this is not tax advice, I am entirely a lay person. If I'm wrong please correct me.
What happens is tax software, unless specifically told (and some will ask) will assign a cost-basis of $0 to something it doesn't know about, which makes the whole $15 appear as a capital gain.
This exactly. Unless you're using a suite that's specifically built for crypto traders, there's no way the software can know that income on day X (which you pay income tax on) is from the same bucket that an asset as was sold later on day Y.
You have to tell the software about your cost basis, which is only a problem if you're mining. It's smart enough to figure out buying and selling on the same platform, but it is not smart enough to figure out that some income was related to later sales and track your cost basis unless you make those connections yourself.
Yeah if you're in for a penny you're in for a pound as they say. Sometimes I think that most of the algorithms should just go away and we should just trade 10 times a year, from a spreadsheet. Then I remember that those algorithms all came from the primordial spreadsheet soup, and just laugh.
Note: the below is assuming you're doing this mining activity as a private person and not setting it up as a separate legal entity like an LLC or something.
Simplifying, lets say 1BTC==$1USD at time of NiceHash payout, and you received 10 bitcoin. You'd then pay something like your regular income tax rate, lets say 30% on that. So the tax on mining income was $3. You'd still potentially have 10BTC, assuming you paid the tax with other dollars on hand instead of instantly selling.
Then crypto goes up from 1BTC==$1 to 1BTC==$1.50. Your crypto is now worth 10 * 1.5 = $15USD. When you go to sell, you don't pay tax on the full $15 you just pay the tax on the gains, $5. So you'd pay the capital gains tax, probably 15% to you, on that $5 so $0.75USD.
You don't pay the capital gains tax rate on the entire value of your crypto, only the gain in value. So from a USD perspective you didn't get double taxed. You had an income of $10, then you had an "income" of $5 when you realized the gains. That's two different taxable events, not a single one. If you exchanged the BTC to USD immediately at the distribution, you wouldn't of had a capital gains tax as you wouldn't have theoretically experienced any gains/losses on that distribution.
IANAL, this is not tax advice, I am entirely a lay person. If I'm wrong please correct me.