Renting Out Your GPU on Vast.ai or RunPod? Why the Electricity Bill and Depreciation Schedule Belong on a Schedule C, Not Your Personal Utility Bill

That graphics card humming in your home office could be earning real money while you sleep. Marketplaces like Vast.ai and RunPod let anyone with a decent GPU — from a single RTX 4090 in a gaming PC to a garage full of H100s — list idle compute for rent to AI developers who need it by the hour. You set your own rates, renters spin up workloads on your hardware, and payouts land in your account.

Here is the part most new hosts miss: the IRS treats that income as business income, and the difference between reporting it correctly and winging it can easily be thousands of dollars a year. Get it right and your electricity bill, your hardware, your internet connection, and even part of your rent become legitimate business deductions. Get it wrong and you either overpay on every dollar you earn or underpay and invite a notice. This guide walks through how GPU rental income is taxed, which deductions actually move the needle, and how to keep books that survive scrutiny.

Your GPU Income Is Business Income — Report It on Schedule C​

When you rent out a spare bedroom, the income generally goes on Schedule E next to your other rental activity. GPU rental does not work that way. You are renting out equipment as an ongoing commercial activity on a marketplace where you set prices, manage uptime, and compete for renters. For a sole proprietor, that is a business, and business income and expenses go on Schedule C of your Form 1040.

Three consequences follow from that classification, and all of them matter:

You owe self-employment tax. Schedule C profit is subject to the 15.3% self-employment tax (Social Security and Medicare) on top of ordinary income tax, once your net earnings from self-employment reach $400 for the year. A host netting $6,000 a year owes roughly $850 in self-employment tax alone — before income tax. Budget for it from the first payout, not the following April.

You can deduct ordinary and necessary business expenses. This is the upside that makes Schedule C classification genuinely good news. Electricity, hardware depreciation, platform fees, internet, cooling, repairs, and a home office allocation all reduce both your income tax and your self-employment tax. Every $100 of legitimate deductions saves a host in the 22% bracket roughly $37 once both taxes are counted.

The hobby-loss rules apply. If your "business" loses money year after year while your electricity bill climbs, the IRS can reclassify it as a hobby — and hobby expenses are not deductible at all. The rough rule of thumb is profit in three of five consecutive years creates a presumption you are running a real business. Keep clean records, price to actually make money, and run it like a business from day one, and you will clear that bar.

The Electricity Bill: Your Biggest Deduction and Your Biggest Recordkeeping Headache​

Electricity is usually the largest ongoing cost of hosting — a single high-end GPU under full load can draw 300 to 450 watts around the clock, which at typical residential rates adds $25 to $60 per month per card before cooling. It is fully deductible to the extent it powers your business. The catch is proving the business portion of a household utility bill.

The IRS requires a reasonable allocation method. Ranked from strongest to weakest:

1. A dedicated meter or submeter on the mining or hosting circuit. This is the gold standard. A $30 plug-in energy monitor on each rig, or an electrician-installed submeter for a dedicated hosting room, gives you exact kilowatt-hours attributable to the business. Multiply by your utility rate and you have a deduction backed by a number, not a guess.
2. Rated power draw times hours times your rate. Take the card's total graphics power (an RTX 4090 is rated at 450W, for example), multiply by hours rented, add a measured allowance for the rest of the system, and multiply by your per-kWh rate from the bill. This is reasonable and defensible — but use measured wall draw, not the spec sheet maximum, since actual draw under rental workloads varies.
3. A flat percentage of the household bill with no basis. This is what gets disallowed. "About half the electric bill is the rigs" with nothing behind it will not survive an examination.

Whatever method you choose, keep the underlying utility bills for at least three years after you file, and keep a simple log showing how you computed the business share each month. If your utility has time-of-use rates, note which rate periods your rentals actually ran in — hosts who pause during peak-price afternoon hours can legitimately show a lower blended cost.

The Hardware: Depreciation, Section 179, and 100% Bonus Depreciation​

The GPU itself — along with the motherboard, power supply, risers, frame, and any dedicated networking gear — is business equipment, and computers are 5-year property under MACRS. You have three ways to write it off, and for most hosts the choice matters less than it used to:

Bonus depreciation (usually the simplest). The One Big Beautiful Bill Act restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. A $1,600 GPU you bought in March 2026 and immediately listed for rent can be fully deducted on your 2026 return. Bonus depreciation has no dollar cap, applies to new and used equipment alike, and can create or increase a business loss — useful if your first-year hosting income is smaller than your hardware spend.

Section 179 expensing. The 2026 Section 179 limit is $2.56 million, so no home host will ever hit the ceiling. The key difference from bonus depreciation: Section 179 cannot create a net loss. If your hosting profit is $3,000 and your new rig cost $5,000, Section 179 lets you deduct $3,000 this year and carry the rest forward, while bonus depreciation deducts the full $5,000 now. For profitable hosts the two are equivalent; for hosts still scaling up, bonus usually wins.

Regular MACRS over 5 years. The slow lane. Rarely the right choice for GPUs, which lose value to newer generations far faster than a five-year schedule admits — but it is the fallback if you prefer to spread deductions into higher-income years.

Three traps to avoid. First, business-use percentage: a card that renders your own video projects half the day and rents out the other half is 50% business property, and only half the cost is depreciable. Second, the more-than-50% rule: if business use drops to 50% or below, you lose both Section 179 and bonus eligibility and must use straight-line depreciation. Third, recapture: if you fully expense a GPU and then pull it from the rental pool for personal gaming within its recovery period, part of that deduction comes back as taxable income. Keep a dated log of when each card entered and left business service.

The Deductions Hosts Miss Beyond Power and Hardware​

Electricity and depreciation dominate, but the smaller line items add up to real money over a year:

• Marketplace and payout fees. Vast.ai pays hosts through PayPal, and PayPal takes its cut on receipt; every platform fee, payment-processing fee, and currency-conversion charge is deductible as a commission or fee expense. Track gross payouts as income and fees as expense rather than netting them — your records should reconcile to the platform's statements.
• Internet service, allocated. A host needs reliable, fast upload bandwidth. Deduct the business portion of your internet bill on a reasonable basis — many hosts use the share of bandwidth consumed by rental traffic, or a conservative flat percentage they can explain.
• Cooling. The air conditioning fighting your rigs' waste heat, extra fans, ventilation ducting, and even a portable AC unit bought for the hosting room are deductible to their business share. In summer this can rival the rigs' own power draw.
• Repairs and consumables. Replacement fans, thermal paste and pads, riser cables, dust filters, and paid repairs keep the operation running and are deductible when paid. Keep receipts; a shoebox photo archive on your phone counts.
• Home office. If part of your home is used regularly and exclusively for the hosting operation — a closet, a corner of the garage walled off for the rigs — you can claim it. The simplified method ($5 per square foot, up to $1,500) is usually plenty for a rig corner and requires no depreciation recapture math later.
• Software and subscriptions. Monitoring dashboards, remote-management tools, and the tax software or professional fees for preparing the business return itself.

None of these require a separate business entity. A sole proprietor claims them all directly on Schedule C, and the $400 self-employment threshold is the only gate to filing.

Payouts, 1099s, and Quarterly Estimated Taxes​

Marketplace payouts create two compliance chores hosts consistently overlook: information reporting and estimated payments.

Do not wait for a tax form to report the income. Payment platforms issue Form 1099-K only when statutory thresholds are met, and those thresholds have changed repeatedly in recent years. Whether or not any form arrives, every dollar of rental income is taxable, and the platform's annual earnings statement — not any 1099 — is your source document. Download it monthly; platforms occasionally redesign dashboards and historical statements can become hard to retrieve.

Pay quarterly once the numbers get real. If you expect to owe $1,000 or more in total tax beyond withholding, the IRS wants estimated payments in April, June, September, and January. A host with a W-2 day job can often cover rental income by increasing paycheck withholding instead — the simplest option, and it avoids juggling vouchers. Either way, the safe harbor is paying at least 100% of last year's total tax (110% at higher incomes) to avoid underpayment penalties regardless of what this year's rental income turns out to be.

Keep business money visibly separate. You do not need an LLC or a business bank account on day one, but routing payouts through a dedicated PayPal balance or a separate checking account makes reconciliation dramatically easier and signals business intent if the hobby question ever arises. Commingling rental income with grocery money in one account is how deductions get forgotten and records become indefensible.

A Simple Monthly Bookkeeping Template for One Rig​

You do not need accounting software to run one or two cards — a spreadsheet with five columns works. Here is what a realistic month looks like for a single RTX 4090-class card rented at moderate utilization:

Two lessons hide in that table. First, full first-year expensing front-loads the hardware deduction, so Year 1 often shows a loss even on a healthy operation — that loss offsets your other income, including W-2 wages, which is a genuine tax benefit. Second, the steady-state margin is driven almost entirely by electricity cost and utilization rate. A host paying $0.30 per kWh in California earns roughly half the margin of a host paying $0.12 in Texas on identical rental revenue — which is why serious hosts treat their utility rate as the single most important business input.

Scale the template by adding a row per rig and a monthly tab per period. When the fleet grows past what fits comfortably in a spreadsheet — separate meters, mixed cards, partial-month rentals — graduate to a real ledger before tax season forces the issue.

When One Rig Becomes a Real Operation​

Most hosts start as sole proprietors and should stay there until the numbers justify complexity. A few milestones signal it is time to level up:

• Consistent profit above $40,000 to $50,000 a year is where an S corporation election starts to pencil out, trading some self-employment tax for payroll costs and administrative overhead. Below that, the entity usually costs more than it saves.
• A second location or a partner means written agreements, separate accounting per site or per owner, and usually an LLC for liability separation — especially once other people's hardware or money is involved.
• A dedicated electrical panel or commercial space triggers local business licenses, possible zoning questions for home-based operations, and insurance review. A standard homeowners policy typically excludes business equipment; a rider or inland-marine policy for a five-figure GPU fleet costs far less than replacing it after a power surge or theft.

Whatever stage you are at, the discipline is the same: meter the power, log the hardware, download the statements, and reconcile monthly. Hosts who do that spend an hour at tax time. Hosts who do not spend a weekend reconstructing a year of PayPal history from memory — and leave deductions on the table they can never get back.

Keep Your GPU Side Hustle Organized From Day One​

As your rental income grows from beer money to a real second income stream, maintaining clear financial records is what keeps the tax benefits you earned. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data — no black boxes, no vendor lock-in. Track per-rig revenue, metered electricity, and depreciation schedules in version-controlled text files you own outright. Get started for free and see why developers and finance professionals are switching to plain-text accounting.