It's difficult to track profit at time of mining since the price of the coin greatly fluctuates, pools are used, etc..  I figure there's two approaches to take here:

Approach1:
a) at the time of mining any bitcoins acquired should be tax as income at the fair price for those coins at the end of business day (or week - depending on the accuracy of the coins)
b) at the time of selling, any appreciation of the bitcoin capital should be taxed as a capital asset with regular short-/long-term rules applied. This also would apply with any bitcoin that we purchased/sold for a profit
> any equipment costs can be subtracted from the overall profit, I believe this only applies to (1)

Approach2:
a) Only follow (1b) from above, and pay taxes on bitcoin as capital gains when it is converted over to US $
> I don't think you can deduct equipment costs in this case

I'm inclined to follow approach1 but it's going to be a huge problem accurately tracking what was made at the time of mining given the fluctuating prices.
Also an interesting side question is how do we declare taxes on items that we purchased with BTC that were acquired with (1b) ??