bitcoin Holders facing high tax bills have a new option to ease the burden: converting what they owe into income-generating mining hardware.
Crypto lending company Arch is implementing TaxShield, which uses a specific provision of the US tax code (bonus depreciation under IRS Section 168(k)) that allows investors to deduct the cost of mining equipment from taxable income.
Here’s how it works: Users post Bitcoin as collateral for an Arch overcollateralized loan, then use the loan proceeds to purchase and host mining rigs through Blockware. The investor can deduct the entire purchase in the first year, potentially eliminating hundreds of thousands in taxes while continuing to earn monthly mining rewards in BTC.
The offering, developed with prominent Bitcoin educator Mark Moss and Blockware, is predominantly aimed at high-income BTC holders, Arch co-founders Himanshu Sahay and Dhruv Patel said in an interview with CoinDesk. A client with $1 million in taxable income could reduce their federal tax bill by approximately $400,000, while maintaining exposure to BTC and earning mining income, they explained.
This is part of a broader push by Arch, best known for its cryptocurrency-backed loans, to create a set of niche offerings typically available in traditional finance but aimed at high-net-worth digital asset holders.
“Many people who have accumulated significant wealth in digital assets over the last 12 to 15 years have not been able to access the same level of high-quality financial services that can be accessed in the real world,” Sahay told Coindesk.
The company’s long-term goal, the founders said, is to evolve into a private bank-like service for cryptocurrency holders: a next-generation wealth management platform that handles lending, income, custody and tax planning.
TaxShield follows the recent launch of “Perpetual Income”, another product created with Mark Moss, which allows bitcoin holders to earn tax-advantaged recurring income without selling their assets.
Last year, Arch raised $70 million in debt financing from Galaxy and a $5 million equity round led by Morgan Creek Digital and Castle Island Ventures to expand its platform.
In the coming months, Arch plans to launch trading operations and is considering introducing card products beyond that, the co-founders said.
Read more: Bitcoin-backed loans will become much cheaper around the world: Ledn co-founder
