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Lyn Alden, author of Broken Money, has a strong advocate for financial control. This is the idea of government spending, not the other way around, but the monetary policy. Her now famous meme, nothing stops this train, but encapsulates the relentless trajectory of government debt and intervention. But what if you could slow the train, if something wasn’t likely to happen?
Enter austerity. It’s not necessarily achievable in any meaningful sense, but it’s the first time in years that it’s been suggested. Not because the market believes it will happen, but because it makes you wonder if policymakers are in fact serious. The shakeup brought about by Trump, Musk and the recent USAID revelations has changed the conversation. For the first time in a long time, there is uncertainty as to whether financial advantage can continue to be checked.
When the country is owned in debt, policy makers have four main levers that they can pull.
- inflation: By reducing the value of any dollar, it quietly erodes debt (and savings).
- Economic Growth: We hope to expand our tax base and boom in productivity.
- Debt restructuring or defaulting: A combination of expansion, renegotiation, or perfect things that are not repaid to the creditor.
- Austerity: Reducing spending and increasing taxes – whether you like it or not.
For years, the austerity lever was a joke. now? It’s at least part of the discussion, and perhaps part of a mixed approach. And if the season of fiscal control continues, tax policy will be the first place where actual, practical changes will emerge.
For Bitcoin holders, this is not another macroshift for passive observation. Unlike inflation and debt restructuring, this is mainly because it is out of individual control –a Tax policy changes are one area where aggressive planning can actually make a difference in your financial life. A good strategy could turn upcoming changes into opportunities rather than financial mines.
Five tax scenarios for 2025
Tax policy is in liquidity as financial advantages run the show. The next six to 12 months may land in one of these five tax systems.
1. TCJA Sunset (5% chance)
Tax cuts and employment law (TCJA) sunset, Congress does nothing. Income tax jumps, real estate tax exemptions will be reduced, and capital gains will be more expensive. Something bureaucratic that is equivalent to ghostling your tax bill.
2. TCJA Extension (10% Probability)
Congress will extend existing tax cuts without new bells or whistles. A true “kicking the can” movement, placing the current framework for several more years.
3. TCJA extension with adjustment (70% chance)
Here’s the basic case: TCJA is still left, but there are changes. Trump suggests that he will allow tax elimination on tips, removal of Social Security benefits taxes, exemptions from overtime salaries, and deducting interest on American-made cars’ car loans. Additional incentives for domestic production could also be found on the table, such as a reduction in corporate tax rates and a revival of 100% bonus depreciation. The possibility of reducing capital gains taxes or extending real estate tax exemptions could form further opportunities for tax planning. And all of those grandfathers…
4. Bitcoin Capital Gain Waiver (10% Probability)
True Curve Ball: Bitcoin gets special status and is exempt from capital gains tax, like gold, as it once was. This opens up huge tax planning opportunities, from profit harvesting to relocating retirement accounts.
5. IRS death (5% chance)
We didn’t expect to say that, but there has emerged a talk of replacing the IRS with “external revenue services.” What does that mean for enforcement? audit? loophole? It’s an unknown territory, but it’s worth watching.
Three wild cards that can shake everything
Beyond these five scenarios, three unpredictable forces could overturn everything, each with a major tax impact on Bitcoin holders.
1. Liquidity Crisis and Emergency Tax Law
Imagine a sudden financial crisis. Government panic, money printers become BRRRRR and emergency stimulus checks begin flight. If the Federal Reserve intervenes aggressively, rare assets like Bitcoin could surge.
2. Strategic Bitcoin Reserve
What was once speculated has now become a policy. The US strategic Bitcoin Reserve has been quietly established by executive orders, but so far it is only as a retention, not an aggressive accumulation strategy. meaning? The federal government now officially owns Bitcoin. This is a major change in our attitude towards assets.
Important Question: Will the US transition from passive holders to active buyers? If so, this would be the first time a major nation-state has become a consistent strategic participant in the Bitcoin market. Stable sovereign buyers are structural changes that could curb Bitcoin volatility and strengthen their role as a macroeconomic hedge.
Will this accumulation continue even during the season of expanding the Federal Reserve balance sheet? If so, it will be in the form of money printing to get Bitcoin – an undeniable accelerationist move. Whether or not accumulation begins, whether or not Bitcoin exists on the government’s balance sheet will change the way future taxes and regulations are treated.
3. Customs shock waves and product inflation
Covid Era has seen multiple supply chain pricing anomalies, including a shortage of sambars, semiconductor droughts and food price spikes. Now imagine these confusions revisiting in sporadic, sustained waves.
As tariffs rise and geopolitical tensions escalate, supply chains remain vulnerable. A shortage of key products can cause a rolling inflation shock and send ripple effects across the global market. Bitcoin will likely respond as a rare asset, but with it, it will create a new tax impact. Investors should prepare for capital gains events resulting from price volatility and potential changes in regulatory treatment if Bitcoin is increasingly considered a strategic reserve asset.
What should a Bitcoin holder do now?
Regardless of which tax scheme or wildcards unfold, here’s what you have control over:
- Roth Conversions – Lock at today’s low rates before potential hikes.
- Capital Gain/Loss Harvest – Use market dips and tax brackets for your profits.
- Real Estate Planning – Adjust after and/or after the exemption changes are hit, using appropriate structure and transfers
- Income Structure – Keep taxable events as efficient as possible.
Expanding Bitcoin holders’ tax strategies
1. Roth conversion: Ensuring tax-free growth
Roth conversion allows assets to be shifted from traditional IRAs to Roth IRAs, paying taxes later to enjoy tax-free growth. If Bitcoin is expected to surge, this move will be locked at today’s (low) tax rate. Strategically convert during market dips to minimize tax bills.
2. Capital Gain Harves: Low Price Lock
If you’re sitting on massive, unrealized profits, don’t wait for your tax rate to rise. If you sell for a year with a decline in taxable income, you can pay less (or in some cases 0%) with long-term capital gains. Combine this with Roth conversion or other revenue drop tactics to get maximum efficiency.
3. Real Estate Tax Plan: The Future of Bitcoin Inheritance
If real estate tax exemptions are reduced, it could be more expensive to cut Bitcoin. Building a holding in a trust or family partnership can help reduce that hit. You can also reduce your tax exposure by gradually giving Bitcoin and using the annual exclusion amount.
4. Revenue Structure: Optimizing Tax Mix
It is important to blend different account types (traditional IRAs, Roth IRAs, and non-retirement accounts) to achieve the highest possible tax efficiency. A well-structured mix allows for tax diversification and strategically withdrawals at a low tax rate at retirement. By balancing taxable, tax-exempt, and tax-exempt income sources, you can optimize your overall tax burden and smooth out your tax rate spikes over time. For Bitcoin holders, strategic sales from various account types based on tax brackets can have a significant impact on long-term wealth retention.
Next step: Focus on what you can control
Rather than worrying about the forces that exist and the levers they pull, focus on what you can control. Even if the financial train is out of control, you can do your best to keep the family wheels on the tracks. Policymakers decide which lever to pull, but your tax strategy remains one of the few that you actually have control over. The window of action will likely be October-December 2025. This is before the law is finalized and the new fees take effect.
Stay before the storm. Schedule referrals with our advisor and CPA team to create a plan that will make the most of your future plans.
This is a guest post by Jessy Gilger, Senior Advisor at Sound Advisory. The opinions expressed are entirely unique and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
