MicroStrategy May Face Billions in Taxes on Unrealized Bitcoin Gains

MicroStrategy, led by Bitcoin advocate Michael Saylor, could face substantial federal tax liabilities on its massive Bitcoin holdings, which are now estimated at $47 billion, according to a report by the Wall Street Journal.

Tax Liability Under New U.S. Rules

The potential tax burden stems from the Corporate Alternative Minimum Tax (CAMT) introduced in the Inflation Reduction Act, which imposes a 15% tax on adjusted GAAP earnings for corporations earning over $1 billion annually.

Notably, this tax includes unrealized gains—profits on assets like Bitcoin that have appreciated in value but remain unsold.

With $18 billion in unrealized Bitcoin gains, MicroStrategy could face billions in tax liabilities starting in 2026. The company is reportedly in discussions with the Internal Revenue Service (IRS) to seek exemptions or relief, though the IRS has not yet signaled whether accommodations will be made.

Implications for Corporate Cryptocurrency Strategies

MicroStrategy’s aggressive Bitcoin strategy, which involves raising capital through stock and debt offerings to acquire cryptocurrency, has brought attention to Bitcoin as a corporate asset. However, the company now faces unique challenges as regulatory scrutiny intensifies.

The resolution of MicroStrategy’s tax situation could set a critical precedent for other corporations holding significant cryptocurrency assets.

Recent Bitcoin Purchase

Despite potential tax concerns, MicroStrategy continues to expand its Bitcoin portfolio. On January 21, the company purchased an additional 11,000 BTC for $1.1 billion, bringing its total holdings to 461,000 BTC, valued at approximately $29.3 billion.

According to Michael Saylor, the company’s average cost per Bitcoin is $63,610.

As the U.S. grapples with evolving cryptocurrency tax regulations, MicroStrategy’s case could play a pivotal role in shaping corporate strategies for managing digital assets.