It’s officially the final lap of 2026 as we enter Q4 2026, and the C-corp and personal filings on extension from 2025 come due in 13 days, while you and I also plan for the final moves we can make in 2026 to mitigate as much tax exposure as possible. I want to draw attention to the piece below at the end of this article from a newsletter on Substack by Blockware Intelligence that I subscribe to in case you missed it, and add some color commentary to why I think it’s worthy of your time and attention.
Four Tax Problems Bitcoin Mining Solves.
Blockware’s four scenarios are straightforward:
1) A business owner selling a company.
2) A real estate investor finally stepping off the 1031 treadmill.
3) An investor preparing for large IRA distributions or a Roth conversion.
4) A physician, attorney, executive, or other high-income earner looking at another year of substantial ordinary income.
But I think there is a bigger idea underneath all four.
Sometimes what looks like a tax problem is really a capital-allocation problem.
Most people encounter a large tax liability and immediately ask, “How do I make the tax disappear?”
The better question is:
What productive assets could I legitimately own or operate that may improve both my current tax position and my future balance sheet?
That is where Bitcoin mining gets interesting.
Not as a loophole. Not as a deduction for the sake of a deduction. And certainly not without modeling the economics with your CPA and advisors.
Under current federal law, certain qualified property acquired and placed in service after January 19, 2025 can qualify for 100% bonus depreciation under Section 168(k).
For someone already interested in Bitcoin, that creates an unusual intersection:
You acquire productive hardware.
The hardware performs computational work securing the Bitcoin network.
It produces Bitcoin.
And, where the taxpayer, business structure and activity satisfy the applicable rules, accelerated depreciation may materially change the after-tax economics.
That is very different from simply buying Bitcoin.
The business-exit case is particularly interesting
Imagine spending 20 or 30 years building a company and then selling it.
Economically, it may be the greatest liquidity event of your life.
Tax-wise, it may also create the strangest income year of your life.
This is why I keep saying exit planning needs to begin before there is an exit.
Ideally months before, and sometimes years before.
Once a transaction becomes binding, the universe of available planning choices can shrink quickly.
This is part of the broader work we are doing around ATOMIQ EX!T: architecting the post-sale balance sheet before the closing table through tax deferral, estate planning, installment strategies, Opportunity Zones, insurance, trusts, charitable structures, and productive reinvestment.
Bitcoin mining may belong somewhere on that decision tree for the right owner.
But the simple arithmetic is not the hard part.
The real questions are:
1) What income can actually be offset?
2) What is the character of that income?
3) Is the activity passive or non-passive?
4) Does the taxpayer materially participate?
5) When is the equipment placed in service?
6) What happens on sale or recapture?
7) Does the taxpayer’s state conform to federal treatment?
And most importantly:
8) Would I still want to own this mining business if the deduction did not exist?
That question should probably be mandatory. The 1031 treadmill is another version of the same problem. Real estate investors can build tremendous wealth through 1031 exchanges. But tax deferral is not the same thing as capital allocation.
Eventually, some investors find themselves buying another property less because they want it and more because they do not want to trigger the tax bill. That is when tax strategy starts becoming investment captivity.
Blockware’s second example asks whether mining equipment could become part of the solution in a year when an investor finally recognizes deferred gains.
The broader principle matters more than the tactic:
Your tax strategy should serve your portfolio. Your portfolio should not exist merely to preserve your tax strategy.
If someone wants less exposure to buildings, tenants, refinancing cycles, and traditional commercial real estate—and more exposure to Bitcoin infrastructure—depreciable mining assets may deserve a place in the conversation.
That does not mean $1 of mining equipment automatically erases $1 of gain. Character, basis, passive-activity rules, at-risk rules, business-loss limitations, and entity structure all matter.
There is no universal “buy miners, erase taxes” button.
The IRA example is equally interesting
Large traditional IRAs eventually create another planning issue: distributions generate ordinary taxable income, and required minimum distributions reduce flexibility over timing.
That creates a more sophisticated question.
Could a separately operated business generate legitimate deductions during a year in which someone intentionally recognizes additional ordinary income?
That is the conceptual intersection Blockware is highlighting.
It is not that the mining equipment somehow lives inside the IRA distribution.
You are simply looking at two sides of the same tax year: recognizing taxable income while potentially creating deductible business expenditures elsewhere, subject to all applicable limitations.
Again, coordinated planning matters more than the transaction itself.
The high-income professional may be the largest audience
Doctors, lawyers, executives, consultants and business owners often face a simple reality: high ordinary income and relatively few meaningful deductions.
That is why business ownership can change the conversation.
Mining potentially allows someone who already believes in Bitcoin to move from being solely a buyer of the asset to being an operator of infrastructure that produces the asset.
But material participation deserves caution.
There is no magical “100-hour rule” that automatically converts a mining investment into an unlimited deduction against W-2 income.
The IRS provides multiple material-participation tests. One test generally requires more than 100 hours of participation and participation at least equal to that of any other individual involved in the activity.
Your CPA should be involved before capital gets deployed—not after.
The bigger idea is hard assets in the digital economy
Bitcoin mining sits at the intersection of:
Energy + hardware + computation + monetary infrastructure + Bitcoin.
That is why I find it interesting.
You are not simply buying an ETF claim or shares of a public mining company.
You are acquiring productive infrastructure participating directly in Bitcoin’s proof-of-work system.
Of course, that creates real risks: Bitcoin price, hashprice, network difficulty, energy costs, hosting, equipment failure, obsolescence, counterparty exposure, and regulatory uncertainty.
Which brings me back to the rule that should sit above every tax-driven investment:
A tax deduction cannot rescue a bad investment.
Before implementing any mining strategy, ask:
Would I want the underlying asset without the deduction?
What is the true after-tax, after-energy, and after-hosting return?
Does my CPA agree with the tax treatment I am expecting?
What happens on disposition or recapture?
And how does this fit into my overall post-tax balance sheet?
That is why I think Blockware’s piece is worth reading.
Their article is tactical.
The larger lesson is strategic.
Wealth creation is not just about reducing this year’s tax bill.
It is about deciding what you want to own on the other side of the tax decision.
Read Blockware Intelligence’s full “Four Tax Problems Bitcoin Mining Solves” below:
DISCLOSURE: I presently do not have any economic or affiliate relationship with Blockware, and my view is that mining should be evaluated first as an operating investment and only secondarily for its potential tax attributes.
This discussion is for educational and informational purposes only and is not individualized tax, legal, investment, or accounting advice. Bonus depreciation, passive-activity rules, material participation, at-risk rules, business-loss limitations, depreciation recapture, state conformity, and other tax provisions depend on the taxpayer’s specific facts. Work with your CPA, tax counsel, and financial advisor before implementing a strategy.
The deduction is interesting.
What you own after taking it is what matters.
