Strategy Implements Preferential Tax Treatment for Preferred Shares Starting in 2025

Bitcoin Strategy’s treasury company announced a significant change in the tax structure of its preferred shares this year. According to information disclosed by NS3.AI, the new scheme reclassifies dividends as a return of capital (ROC), providing preferred investors with a substantially more favorable tax treatment under U.S. federal regulations.

A Revolutionary Dividend Structure

Through IRS Form 8937, Strategy specified the details of this tax transformation. Dividend amounts that do not exceed the cost basis of the preferred shares will be classified as ROC, exempting shareholders from ordinary income tax. Only when distributions exceed the initial investment will the capital gains regime apply, resulting in a significantly lower tax burden for these security holders.

Tax Impact for Preferred Shareholders

Strategy has built a strong financial position by raising approximately $7.4 billion through successive issuances of perpetual preferred shares. To date, the company has distributed around $413 million in shareholder returns. With a weighted average annualized dividend rate of about 9.6%, preferred shareholders have experienced competitive returns. This new tax treatment enhances the attractiveness of these instruments by preserving a larger portion of investors’ net earnings.

Long-Term Financial Outlook

The company has expressed its intention to maintain the tax-free return of capital regime for more than a decade, providing stability and predictability for its preferred shareholders. This long-term perspective strengthens the confidence of institutional and retail investors who have bet on preferred shares as a vehicle for predictable income generation. The differentiated tax treatment reinforces the value proposition of these instruments in the constantly evolving digital asset market.