Overview
TaxShield is a turnkey strategy co-designed with Mark Moss and powered by Arch (lending) + Blockware (hosted mining). It converts taxes owed into income-producing Bitcoin mining assets, all without selling your BTC.
Core idea:
Pledge BTC → borrow against it with Arch → purchase hosted miners via Blockware → claim 100% bonus depreciation under IRC §168(k) on the qualifying capex → keep BTC exposure while earning monthly mined BTC that can help service the loan.
Illustrative outcome:
A client with $1,000,000 of taxable income could offset that income with qualifying mining equipment purchases, potentially saving ~$400,000 in federal taxes (assumes 40% combined rates; actual outcomes vary), while continuing to own BTC exposure and receiving mined Bitcoin payouts monthly.
You retain full Bitcoin ownership at all times and your assets are never rehypothecated.
How It Works
Pledge Bitcoin (Arch)
Use BTC as collateral for an over-collateralized USD/USDC loan.
Maintain BTC price exposure the entire time.
Buy Hosted Miners (Blockware)
Blockware sources, titles, deploys, and maintains miners in your name across U.S. facilities.
Hosting, power, uptime, and monitoring handled for you.
You receive direct, transparent reporting.
Claim 100% Bonus Depreciation (IRC §168(k))
Deduct the full qualifying equipment cost against taxable income in Year 1 (subject to eligibility, placed-in-service timing, and current tax law).
Work with your tax professional to validate eligibility and filing.
Receive Mined BTC Monthly
Rewards paid directly to your wallet.
You can use proceeds to service the loan while preserving your original BTC exposure.
Amounts Flow (Exact Cash Mechanics)
To keep the experience frictionless, we align three numbers:
Your target depreciation amount → e.g., $1,000,000 (your goal for §168(k) bonus depreciation).
Blockware equipment purchase total → e.g., $999,950.50 (we round to real-world SKU/pricing).
Loan amount → slightly higher than the equipment cost to account for origination fees and any required upfront costs, so net disbursed equals the Blockware invoice.
Example:
Goal depreciation target: $1,000,000
Blockware equipment total: $999,950.50
Loan amount shown in the calculator: $1,015,178.17 (example; includes origination fees)
Net disbursement to you = $999,950.50 which you then send in full to Blockware to purchase and deploy the equipment.
Result: your tax objective, invoice, and funding all line up without manual juggling.
Example Scenario
Assumptions (hypothetical):
Taxable income: $1,000,000
Combined effective tax rate: 40%
BTC collateral posted with Arch
Equipment cost (qualifying): ≈ $1,000,000
100% bonus depreciation under §168(k) (subject to law in effect, placed-in-service by year-end, business use, etc.)
Arch loan: over-collateralized; flexible LTV; no prepayment penalties
Monthly mined BTC payouts to client wallet
Potential results:
Deduction: ~$1,000,000 (bonus depreciation)
Potential tax savings: ~$400,000
BTC exposure maintained + monthly mined BTC begins accruing post-deployment
Mined BTC can be used to help service interest while preserving original BTC stack
Actual tax outcomes depend on eligibility, entity type, passive/active rules, state regimes, and timing. Always consult your tax advisor.
Key Features & Benefits
Turn taxes into capex — Convert a liability into income-producing mining assets.
Keep BTC exposure — No selling; loan is secured against BTC.
Direct monthly payouts — Mined BTC paid to your wallet.
Compliance-first — Structured for §168(k) bonus depreciation eligibility (subject to law and facts).
Fully hosted — Sourcing, deployment, power, uptime, monitoring managed by Blockware.
Institutional-grade custody — BTC collateral held with a qualified custodian; bankruptcy-remote, not rehypothecated.
Flexible financing — Terms up to two years; flexible LTV; no early repayment fees.
Transparent reporting — Operational data + accounting exports to simplify filings.
Eligibility & Requirements
Who qualifies:
Individuals, businesses, and trusts with taxable income and sufficient BTC to post as collateral.
Consult your advisor regarding trade or business use, passive vs. active rules, at-risk rules, basis, and entity specifics.
Jurisdictions:
All eligible Arch loan customers (U.S. states and international entities supported where permitted). If you don’t see your state/country supported, contact [email protected].
Collateral custody:
BTC held at a qualified custodian (Anchorage Digital), insured, bankruptcy-remote, never rehypothecated.
Placed-in-service timing:
To utilize bonus depreciation for a given tax year, equipment generally must be acquired and placed in service by year-end. Lead times and energization dates matter so start early.
Getting Started
Apply at archlending.com (or log in to your Arch dashboard).
Choose TaxShield in the product menu.
Set your depreciation target (e.g., $1,000,000).
Review the pre-populated loan amount (it will include fees so net funds match the Blockware invoice).
KYC/KYB, sign docs, and deposit BTC collateral.
Receive the net disbursement that equals the Blockware invoice and fund your equipment purchase.
Blockware deploys; you begin receiving monthly mined BTC payouts.
Coordinate with your tax professional to file for bonus depreciation under §168(k).
FAQs
General / Lending
What exactly is TaxShield?
A turnkey structure to offset taxable income using qualifying mining equipment purchases (bonus depreciation under §168(k)), financed via an over-collateralized BTC-backed loan, with hosted operations managed by Blockware. You retain BTC exposure and receive monthly mined BTC.
What LTV and terms should I expect?
Arch offers flexible LTVs and terms up to two years, with no early repayment fees. Exact terms depend on loan size, borrower profile, and market conditions.
Interest rate and fees?
Standard Arch loan pricing applies (interest + one-time origination). The loan amount matches the Blockware invoice, ensuring no out-of-pocket gap. Use our dashboard in the app to get exact terms.
Can I prepay or exit early?
Yes. There are no prepayment penalties. You can retire the loan anytime.
Is there a credit check?
No.
What happens if BTC falls and my LTV rises?
Arch monitors LTV in real time. If it approaches thresholds, you can add collateral or repay partially. For BTC, margin call occurs at 70% LTV (24-hour cure window, extendable). At 80%, Arch will partially liquidate collateral to restore LTV to target levels.
How is my BTC collateral stored?
With a qualified U.S. custodian Anchorage Digital. Assets are segregated, insured, bankruptcy-remote, and never rehypothecated.
Can mined BTC alone cover interest?
It depends on hashprice, difficulty, power rates, and fleet size. Many clients apply part of their mined BTC toward interest; others use fiat or stablecoins. Our team can help you model both options.
What are the main risks?
BTC price risk: impacts LTV and margin buffer
Mining economics: network difficulty and hashprice drive payouts
Operational risk: uptime, curtailments, maintenance
Regulatory/tax risk: §168(k) interpretations can change
Timing risk: missed placed-in-service deadlines may affect deductions
Our team offers complimentary consulting services to help manage these risks and guide our clients.
Who owns the miners?
You do. The machines are titled in your name, hosted and operated by Blockware. You receive a bill of sale, serial numbers, and full documentation. This structure ensures you legally own the equipment, enabling depreciation eligibility.
What are the timelines I should care about?
Equipment must be acquired and placed in service by Dec 31 for same-year bonus depreciation.
Lead times for sourcing, racking, and energization vary; starting early reduces timing risk.
Mining
Who actually owns and operates the mining facility?
Blockware owns or leases space in top-tier U.S. data centers and serves as the full-service provider for procurement, deployment, uptime, and support.
Is there a service-level agreement defining uptime, maintenance, and electricity costs?
Yes. Blockware provides a minimum 90% uptime SLA. Downtime below 90% results in credits on future hosting bills.
Are there guarantees or insurance against operational failure or theft?
Blockware does not insure client-owned ASICs. You can obtain your own insurance, though most clients (≈95%) choose not to. Physical and operational security measures make theft or loss highly unlikely.
Where is the mining taking place?
In U.S.-based data centers managed by Blockware — e.g., Texas, Iowa, Kentucky, Georgia, Oklahoma, and Missouri.
What specific hardware is being purchased?
Bitmain Antminer S21 Pro units — top-of-the-line ASICs known for performance, efficiency, and resale value. Each unit is titled to you and qualifies for §168(k) bonus depreciation in the year it’s energized.
What reports do I get?
Operations dashboards and accounting exports compatible with bookkeeping and tax workflows.
What are all of the fees associated?
CapEx: Full upfront cost of ASICs
Security Deposit: Two months of energy + hosting
Operating Costs: Monthly hosting and electricity fees
What is the cost of electricity?
$0.07–$0.078 per kWh depending on deployment size and structure. Larger deals receive better rates.
If a machine breaks, what happens?
Blockware manages all repairs. During the manufacturer warranty (~10 months), repairs are covered. After that, repair costs are client responsibility; Blockware coordinates logistics and redeployment.
How are mining rewards paid?
Directly to your wallet each month. You can use a portion to service interest while keeping BTC exposure intact.
Duration / Hardware Lifespan
Miners typically stay efficient for 5+ years. Returns peak in the first 18 months, then gradually decline but remain attractive depending on BTC price and transaction fees.
Profitability & Assumptions
The 20–50% APY range reflects current mining economics based on BTC price, network difficulty, and energy costs. Breakeven typically sits around $60–70K BTC. Sensitivity analyses and pro formas are available through Blockware.
Can individuals use this or is it “business-only”?
Both can participate, typically via pass-through entities (LLC, S-corp, etc.) based on advisor guidance. Business purpose, passive/active rules, and basis limitations determine outcomes. We can provide you with a tax professional to guide you through the setup.
Tax
How does §168(k) 100% bonus depreciation work here?
If you and your entity qualify, you may deduct 100% of eligible equipment costs in Year 1 once placed in service that tax year, subject to prevailing law and facts. A tax professional must confirm eligibility and file accordingly.
How is it substantiated that Bitcoin mining equipment qualifies?
Under §168, computer equipment is classified as 5-year property, making ASICs eligible for 100% bonus depreciation in Year 1. The treatment mirrors other high-performance computing assets used in business operations.
Does it hold if Blockware remotely manages the miners?
Yes. Physical possession isn’t required; ownership and business use determine eligibility.
If Blockware manages the operation but miners are in my name, how is that treated for taxes?
Ownership and management are separate. You own the equipment and can claim depreciation. To qualify as active under §469, document at least 100+ hours of participation yearly (e.g., reviewing contracts, monitoring performance, overseeing strategy). The Blockware team can help coordinate your hours and provide documentation for your CPA.
Is the mining setup considered passive or active?
Depends on your involvement:
Active (100+ hrs + main operator): Can offset active income (W-2, business).
Passive: Can only offset passive income, with carryforwards for unused deductions.
Our team provides tools to track participation for compliance.
Recapture risk — what happens if I sell or stop using the miners?
Selling fully depreciated assets may trigger §1245 depreciation recapture (taxable as ordinary income). Reinvesting proceeds into new miners can create new deductions, maintaining tax efficiency.
Has this exact arrangement been IRS-tested?
While the TaxShield structure is new, it’s built on long-standing tax principles. IRS Notice 2014-21 confirms crypto mining can be treated as a trade or business. §168(k) and §469 precedents are well established and applied consistently across similar industries.
Is there a tax opinion letter supporting this strategy?
Yes, one can be provided upon request.
Is the interest on the Arch loan tax-deductible?
Yes, if your mining activity qualifies as a trade or business for tax purposes.
Does “taxable income” mean W-2, K-1, etc.?
Yes — taxable income includes W-2 wages, K-1 pass-through income, and similar sources subject to income tax.
Can it offset all taxable income or only certain types?
If materially active, depreciation may offset active income (W-2, business) and passive income (real estate, partnerships). It cannot directly offset capital gains, though those clients often have other income sources to apply deductions against.
What if equipment isn’t energized by year-end?
Bonus depreciation requires the asset be placed in service within the tax year. Delays could defer deductions. Early action minimizes this risk. Our team is ready to help you move quickly.
Is there state conformity to federal rules?
Not always. Some states conform to federal §168(k); others don’t. Our tax professional partners can help to confirm your state’s treatment.
Do you provide tax or legal advice?
No. Arch provides the structure, financing, and custody. Our tax professional partners provide tax and legal guidance.
Presume the BTC produced and used to repay the loan is taxable income, correct?
Correct. Mining rewards are taxable when earned, and if sold or used for repayment, that triggers a taxable disposal event.
How are Bitcoin mining rewards taxed, and what is the cost basis of the mined Bitcoin?
Under current IRS guidance (Notice 2014-21), mined Bitcoin rewards are treated as ordinary income at the fair market value (FMV) at the time they are received. This means the cost basis of each reward is equal to its FMV upon receipt. Any expenses related to mining operations, such as hosting, electricity, or management fees, can generally be deducted against that income.
Contact & Support
Questions or ready to scope a plan?
Email: [email protected]
Toll-free: +1 855-272-4670
Or apply via your Arch dashboard at archlending.com
Important Disclosures
The example provided above is a general illustration of tax principles. This is not tax, legal, or accounting advice.
Tax outcomes depend on your facts, entity, timing, and current law. Consult your professional advisor.
Mining payouts, uptime, and economics are variable. BTC price, network difficulty, and power markets can impact results.
Loans are secured by BTC collateral; margin calls and partial liquidations can occur if LTV thresholds are breached.