So you're saying, we pay income tax on mining revenue?
yes
Is that only when we cash it out?
no
I've been cashing out through Coinbase fairly directly from NiceHash, so it's not too complicated. I guess, I want to get my taxes right. From what I read before, they considered CC to be an "intangible asset", and that you would pay short-term capital gains.
broadly:
in the IRS's view, you have income the moment your wallet address is credited with a token. that income is whatever the value of that credit is in dollars at that moment. that's supposed to be declared on that year's income taxes. you can write your costs against it such as mining hardware (though i'm not sure whether computer equipment is depreciated vs. expensed, and of course all this stuff probably changed for tax year 2018) and electric bills (though only the portion associated with the mining activity, assuming you're not renting a facility just to mine in).
then, when you sell, whatever gain those tokens have gotten since you mined them is a capital gain. that capital gain is also taxed, at whatever rate capital gains are (short term, same as ordinary income; long term, favorable rates).
if all your mining and selling occurred in one tax year, then it really wouldn't matter whether it's regular income or if its capital gains, as all the tax events happened in one year and are subject to the same rate structures.
but, if you mined in one year, and sold in another, you'd have the mining activity on one year's return, and a capital gain on the other year's return. in the capital gain worksheet, you'd use the basis as declared (and taxed) on the previous tax return to calculate the gain amount.
as an illustration: in year 1 you mine $100 in tokens. you don't sell any tokens. and you stop mining at the stroke of midnight on new years eve. you file your tax return for year 1 and pay 25% ordinary income tax on it, or $25. in year 2, the value of your tokens goes up to $1000. you sell those. you then have a capital gain of $1000 - $100 = 900. that would then be subject to 25% tax rate, so you'd pay $225.
if, instead of selling in year 2, you held the tokens long enough to qualify for LTCG (let's say year 3), you would qualify for reduced rates (let's say 10%). so, you'd have a $900 capital gain, which would have $90 in taxes.
now, since most people don't neatly keep the original mining and the capital gains separate like that, it's a bit messier out in the real world. since the tokens themselves are fungible they probably adopted either a last mined first sold, or first mined first sold rule.