Buying Crypto with an IRA

November 30, 2021

Mat Sorensen

By using a Roth IRA, an investor can purchase and sell crypto tax-free.
Buying Crypto With IRAs Cryptopedia Link

 

Personal Crypto Accounts vs. Roth IRAs as Crypto Retirement Accounts

The difference in taxation between personal crypto gains and crypto Roth IRA gains is significant. Say you bought $10,000 USD worth of bitcoin (BTC) on January 1, 2017 and sold that BTC on August 26th, 2021 for $470,988. How much of that profit do you get to keep on your $460,988 gain? If you bought and sold the bitcoin personally, you’d only get to keep $353,241 of the gain, as you would be paying taxes of $115,247. If you bought and sold BTC in a Roth Bitcoin IRA, you’d get to keep the entire $460,988 gain.

A $115,247 tax assumes a federal long term capital gains rate of 20% and a state tax rate of 5% for a total tax rate of 25%. There are no taxes owed when you sell crypto in an IRA and the gains are designed to come out entirely tax-free at retirement with a Roth IRA.

 

Retirement Accounts Are For Building Long-Term Wealth

Roth IRA funds generally come out tax-free once the account owner reaches retirement age of 59.5. An investor can access the funds before 59.5 but would be subject to taxes on the gains and will have a 10% early withdrawal penalty to access their Roth IRA gains. As a result, investors using any type of IRA or other retirement account should be looking towards building wealth for the long term.

 

Read the full article here.

 

Mat Sorensen

Mat Sorensen

Mat has been at the forefront of the self-directed IRA industry since 2006. He is the CEO of Directed IRA & Directed Trust Company where they handle all types of self-directed retirement accounts, which are typically invested into real estate, private company/private equity, IRA/LLCs, notes, precious metals, and cryptocurrency. Mat is also a partner at KKOS Lawyers. He is published regularly on retirement, tax, and business topics, and is a VIP Contributor at Entrepreneur.com. Mat is the best-selling author of The Self-Directed IRA Handbook, the most widely used book in the self-directed IRA industry.
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