Lyn Alden, author of Broken Money, made strong grounds for fiscal dominance that government spending determines monetary policy rather than the other way around. Her now famous meme, nothing stops the train, which encapsulates the relentless trajectory of government debt and intervention. But what if something (regardless) might slow down the train?
Enter Austerity. In any meaningful sense, this is not necessarily achievable, but is hinted for the first time in years. The market is adjusting, not because they think it will happen, but because they start to doubt whether decision makers are really serious. The dialogue has changed with the reorganization of Trump, Musk and the recent U.S.A.D. For the first time in a long time, whether fiscal dominance can continue to be unaffected by the organization.
When a country floods its debt, policy makers have four main leverages:
- inflation: By making every dollar worth less money quietly erode debt (and savings).
- Economic Growth: Expand the tax base and hope that productivity will flourish.
- Debt restructuring or default: A mixture of extended, renegotiated or directly not repaying creditors.
- Shrink: Reduce spending and increase taxes – whether you like it or not.
The tightening leverage has been a joke for years. Now? This is at least part of the discussion and part of the hybrid approach. If fiscal dominance continues, tax policies will be the first place where real, feasible changes occur.
For Bitcoin holders, this is more than just a macro shift to passively observe. Unlike inflation or debt restructuring (mainly the gospel of personal control)one Tax policy changes are areas where a positive plan can actually change your financial life. The right strategy can turn changes into opportunities rather than financial landmines.
Five possible tax situations in 2025
With fiscal dominance, tax policies are in a changing state. The next 6-12 months may fall into one of these five tax regimes – with a clear impact on Bitcoin holders.
1. TCJA Sunset (probability is 5%)
The Tax Cuts and Employment Act (TCJA) sunset, Congress does… nothing. Income tax jumped higher, inheritance tax-free income shrank, and capital gains became more expensive. Bureaucracy is equivalent to your tax bill.
2. TCJA extension (10% probability)
Congress has expanded existing tax cuts without any new bells or whistles. The real “kick can” moves, putting the current frame for several years.
3. TCJA extension with adjustment (70% probability)
Here is the basic situation: TCJA still exists, but has been modified. Trump hinted to cancel taxes on tips, eliminate taxes on social security benefits, exempt overtime pay, and allow interest on car loans for U.S.-made cars. Additional incentives for domestic production (such as lowering corporate tax rates and restoring 100% bonus depreciation) may also be on the desktop. The possibility of reducing capital gains taxes or expanding estate tax exemptions may further shape tax planning opportunities. And their magnificent dad…
4. Exemption of Bitcoin Capital Returns (10% Probability)
The Real Bell of Curve: Bitcoin has a special status that exempts it from capital gains taxes, just like gold once upon a time. From harvest to repositioning of retirement accounts, this will be a huge tax planning opportunity.
5. IRS death (probability is 5%)
We never thought we would say that, but talking about using “external tax services” instead of the IRS has surfaced. What does this mean for law enforcement? Review? Vulnerability? This is an unknown territory, but worth a look.
Three wildcards that can shake everything
Apart from these five scenarios, three unpredictable forces can subvert everything, each with a significant tax impact on Bitcoin holders.
1. Liquidity Crisis and Emergency Tax Legislation
Imagine a sudden financial crisis. Government panic, money printer opportunities and emergency stimulus checks began to fly. If the Fed actively intervenes, scarce assets like Bitcoin may surge – more important than ever to timing of earnings and tax plans.
2. Strategic Bitcoin Reserves
It was once speculated that it had become a policy. The U.S. strategic Bitcoin reserves have been quietly established through executive orders, but so far have been only used as a holding, not an active accumulation strategy. meaning? The federal government now officially owns Bitcoin, which is a major change in its position on assets.
Key question: Will the United States transition from passive holders to active buyers? If so, it would mark the first time that major nation-states have become consistent, strategic players in the Bitcoin market. Stable sovereign buyers will be a structural shift that could weaken Bitcoin’s volatility and strengthen its role as a macroeconomic hedge.
Will this accumulation continue even in the season when the Fed’s balance sheet expands? If so, it would constitute a form of currency printing to acquire Bitcoin, which is an undeniable accelerated action. Whether or not the accumulation begins, the only presence of Bitcoin on the government balance sheet will change its future tax and regulatory treatment, and investors must consider it in their long-term plans.
3. Tariff shock waves and commodity inflation
The Covid era sees pricing anomalies in multiple supply chains – open-pit shortages, semiconductor drought and food price peaks. Now imagine that these destructions are reexamined in sporadic and continuous waves.
Supply chains remain fragile as tariffs rise and geopolitical tensions escalate. Shortages of major commodities may trigger inflationary shocks, thus exerting a ripple effect in global markets. Bitcoin, as a scarce asset, may react, but with it new tax implications. If Bitcoin increasingly sees Bitcoin as a strategic reserve asset, investors should be prepared for capital gains events due to price fluctuations, as well as potential shifts in regulatory treatment.
What should Bitcoin holders do now?
No matter which tax system or wildcard play, you can control:
- Rose Convert – Lock down today’s lower speed before hiking again.
- Capital gains/loss gains – leverage market dip and tax brackets to give you an advantage.
- Real Estate Planning – Adjustment before and/or after any exemption changes to use the appropriate structure and transfer
- Income Structure – Make taxable events as efficient as possible.
Expanding the tax strategy for Bitcoin holders
1. Rose Conversion: Ensure tax-free growth
Roth’s conversion allows you to transfer assets from a traditional IRA to a Roth IRA and pay taxes now to enjoy tax-free growth later. If you expect Bitcoin to soar, this move will lock in today’s (lower) tax rates. Make strategic conversions during market downturns to minimize your tax bill.
2. Capital gains: Locking in lower rates
If you sit on a large unrealized gain, don’t wait for the tax rate to rise. Sales of lower taxable income over the year can mean payments to long-term capital gains (0% in some cases). Combine it with Roth conversion or other low-income strategies to maximize efficiency.
3. Estate Tax Planning: The Future of Bitcoin Inheritance
If the estate tax exemption is reduced, putting Bitcoin down may become more expensive. Establishing holdings in a trust or family partnership can help mitigate this hit rate. Gradually giving away Bitcoin (excluding amounts for the year of use) can also reduce tax exposure.
4. Income Structure: Optimize Your Tax Portfolio
For optimal tax efficiency, mix different account types (traditional IRA, Roth IRA and non-retirement accounts). A well-structured combination allows tax diversification to ensure you can withdraw funds at a lower tax rate when you retire. By balancing taxable, extending tax and tax-free revenue sources, you can optimize the overall tax burden, so that the tax rate calms over time. For Bitcoin holders, strategic sales of different account types based on tax levels can have a significant impact on long-term preservation.
Next: Follow what you can control
Instead of worrying about the power they extend and the power of leverage, focus on the power you can control. Even if the financial train gets out of control, you can try your best to keep your family’s wheels on the track. When a decision maker decides which leverage to pull, your tax strategy is still one of several things you can actually control. The window to take action could be October to December 2025 – when legislation is finalized and before the new interest rates take effect.
Stay ahead of the storm. Introduce with our team of consultants and CPA teams to develop a plan to make the most of what is coming.
Here is a guest post by Jessy Gilger. The opinions expressed are entirely their own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.
