Gold mining As a business, NOT hobby. Tax incentives - writeoffs ETC

[johnnysau]

Can it be done full time and not a hobby, not like gold rush but us little guys ?

No business sense for me, but others can chime. See if it can be done effectively not as hobby ?
Thanks for your support. johnnysau

 

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[arizau]

As far as I know you have to actually set up a business separate from your own personal finances. That said the money to do that would have to be transferred/invested from your own or others personal funds and be accounted for separately from personal accounts. A lawyer or maybe a CPA should be able to help you set one up.

 

[Darke]

As far as the IRS is concerned....If it's your only job and it makes a profit then yes. If you do it part time and it barely breaks even then no it'll still be classed as a hobby. Hobby expenses are no longer deductible as of last year. You don't need any separate accounts or anything like that for small business. Your accounting method separates them. If you plan on having non contract employees or becoming a corporation then it becomes a little more involved.

 

[OreCart]

I run my mining expenses through my farm.

It gets a little easier with farming because the IRS and USDA recognize that a farm will have areas that are non-farmable, like forests, or may have mineral resources under the top soil, and it is in the best interest of the nation, and the farm itself, to manage them.

I already have a small gravel pit on my farm, so gold will just be an addition too what I already do, if it seems feasible to do.

If at all possible to meet the standards of being a farm for your county, it is in a person's best interest to do so. The biggest advantage is that a farm does NOT have to be profitable every five years or the IRS considers it to be a failed business. If a "mine" is a business separately, it would have to.

Another big advantage is being grandfathered on environmental laws. My forefathers dug all over this farm, what for, I am not sure, but they cannot possible prove it was not for gravel or gold, and anything dug in areas before 1970, are grandfathered.

There are also a lot of tax advantages, not to mention lower interest rates, and financing options that are just not available if these were separate mining or logging operations.

…

There is one big disadvantage though. Being a single farm entity, everything is one big happy family. I cannot say buy a piece of equipment new for the mining operation, run it for a year or two, then sell it to my farming operation, allowing me to keep the equipment, yet show a loss for the farm, and profit for the mine, all in the same year. The same with logging, you could not have the mine, buy the timber from the logging company, to show profit and loss as a person saw fit. Being all united under the same farm banner, the three enterprises create profit, or create loss, jointly.

 

[KevinInColorado]

I wrote, and now market, a gold prospecting guide book (to Colorado gold fields) so I run all of my prospecting and mining thru that biz. I figure all of my gold related activity which i share online supports my “brand”.

No need for separate accounts although I do have a separate checking account so the direct deposit of book royalties doesn’t get lost in amongst all the other transactions in my regular checking Acct.

I’m told that as long as you make a profit over half the time, the irs will acknowledge that it’s a business.

So my advice, start writing a book! (You’d be surprised how easy it is and there’s NO need for any cash outlays.

 

[Bonaro]

I run my guide business as an in-home business. I keep the biz $ separate from my personal and use my biz account for all mining purchases. I file taxes with my personal fiances and take all the deductions for loss. If you start tracking all of your mining related expenses (licensing, advertising, depreciation, overhead etc...) you will learn that mining is very expensive. If you are a weekend miner you dont realize how much you spend because you adsorb the costs gradually.

 

[OreCart]

I run my guide business as an in-home business. I keep the biz $ separate from my personal and use my biz account for all mining purchases. I file taxes with my personal fiances and take all the deductions for loss. If you start tracking all of your mining related expenses (licensing, advertising, depreciation, overhead etc...) you will learn that mining is very expensive. If you are a weekend miner you dont realize how much you spend because you adsorb the costs gradually.

You are absolutely right! But if I may respectfully say, this applies to everything in life. It really behooves everyone to write down their expenses, even their domestic ones. It will shock a person on what they spend on various items. If I see what I am spending my money on, then I can see things I am wasting my money on.

I have been doing it for years, and now I am a minimalist on everything. But it is so freeing. Everyone seems to be worried about their credit score, and mine is dropping like a rock. Since credit score is based 100% on debt, the lower the better!!

My insurance agent said if I had a higher credit score I could save $10 a month on car insurance. Really, I am "losing" $10 a month in savings?

I already save $30 a month by paying for the vehicles in cash by just having just liability insurance. And homeowners insurance, I do not even have any. Why would I. I was paying $1400 for farm insurance 10 years ago. In 10 years time, on the three houses I got, I saved $42,000 in ten years! Sure one of my houses could burn, but I have saved enough money to darn near buy a double wide in cash, let alone having two other houses I could move into. Yes, I will gladly pay $10 a month in order to save $380!

It is not how much money you make, it is how much money you SPEND, and unless it is kept track of, there is a lot of needless spending.

A micro-miner can make it, they just have to have a very sharp pencil (and good ground helps). :-)

 

[Rail Dawg]

You can absolutely do gold mining as a business.

You can lose money for 2 years. After that any losses are considered hobby losses and are not deductible.

I've been a "tax expert" on the side for 30 years and after an audit back in '92 the IRS hasn't bothered me again. Easier fish to fry for them.

If you can keep good records, get a simple business checking account, read up on Schedule C (Business Income or Loss) and sell at least some gold you can deduct tens of thousands as losses as you build your mining business.

Under $75 no receipt required. .58 per mile on your vehicle for 2019. The list of deductions is huge. I recommend "JK Lassers Tax Guide". Read the chapter on Schedule C.

After 2 years close the mining business then start a new mining equipment supplier business just to reset the clock.

I could go on for pages but knowing the tax laws and using them to your advantage is time well spent learning. Record-keeping is very basic and when you know it's putting $$$ directly into your pocket you'll be motivated.

Good luck!

 

[Bejay]

Rail Dog stated "You can absolutely do gold mining as a business. You can lose money for 2 years. After that any losses are considered hobby losses and are not deductible."

I have an accountant who does my corporation taxes as well as my farm taxes. Many years ago I had him structure my mining as a "business" (however I have always had a number of active claims). The rule was you had to find gold and sell gold....the profitablility aspect was a valid point up and until the State closed active placer mining;...and made it impossible to extract the mineral. All the equipment and expenses to maintain the active claims remained.....but one must show an intent to continue to achive profitablility. BUT the State made that impossible to do. As long as litigation continues the door remains open to regain the potential to obtain a profit. The new Senator Wyden bill that created additional closures to mining is another issue that I personably must address. So having a valid active claim, and attempting to maintain that holding requires continued costs and expenditures.

I would advise any who want to create/set up a mining business to speak with their accountant and show justification for the mining activity they engage in.

As Rail Dog says: "I could go on for pages but knowing the tax laws and using them to your advantage is time well spent learning. Record-keeping is very basic and when you know it's putting $$$ directly into your pocket you'll be motivated."

Intent is a big factor that plays a key role in Tax law.....as I understand it.

Bejay

 

[akflyer]

A business has to show an intent to make profit. With my business the start up and tooling costs still keep adding up that every dime made goes right back into new tools etc. The intent is that once everything is set up properly out of pocket then the real money making can begin. Sometimes it works out, sometimes it doesn't. The bottom line is I get some really cool tools that were a 100% tax write off.