Bitcoin Holders facing high tax bills have a new option to ease the burden: by converting what they owe into revenue-generating mining hardware.
Crypto lending company Arch is rolling out TaxShield, which uses a specific provision of the U.S. tax code – bonus depreciation under IRS §168(k) – that allows investors to deduct the cost of mining equipment from taxable income.
Here’s how it works: Users deposit Bitcoin as collateral for an overcollateralized loan from Arch, 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 wiping out hundreds of thousands in taxes while still earning monthly BTC mining rewards.
The offering, developed with prominent Bitcoin educator Mark Moss and Blockware, primarily targets 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 about $400,000, while maintaining exposure to BTC and earning mining income, they explained.
It’s part of a broader initiative by Arch, best known for its cryptocurrency-backed loans, to create a suite of niche offerings typically available in traditional finance but aimed at high-net-worth digital asset holders.
“Many people who have built significant wealth through digital assets over the last 12 to 15 years have not been able to access the same level of high-quality financial services that you can access in the real world,” Sahay told Coindesk.
The company’s long-term goal, the founders said, is to evolve into a private banking-like service for crypto holders: a next-generation wealth management platform that manages lending, income, custody and tax planning.
TaxShield follows the recent launch of “Perpetual Income,” another product designed with Mark Moss, which allows Bitcoin holders to earn recurring, tax-efficient income without selling their assets.
Last year, Arch secured $70 million in debt financing from Galaxy and a $5 million seed round led by Morgan Creek Digital and Castle Island Ventures to expand its platform.
In the coming months, Arch plans to launch trading and plans to introduce card products beyond that, the co-founders said.
Read more: Bitcoin-backed loans will become much cheaper worldwide: Ledn co-founder
