EP 29 – Can You Move Crypto Into Your Roth IRA?

Mark and Mat answer your questions about owning crypto in a Roth IRA, like: “Can you move crypto you already own to a Roth IRA?” “How do I save taxes on crypto I already own?” “If I use an IRA to own crypto, can I access my money before retirement?” and more.

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Mat Sorensen: Welcome, everyone, to the directed IRA podcast with Mark Kohler and Mat Sorensen. Today is a special episode where we’re going to focus on a common question we’ve been getting. For those of you that own crypto, Bitcoin, Ethereum, whatever crypto you’re owning and you want to get an end to a Roth IRA for that tax-free growth,

Mark Kohler: Yep you don’t want to pay taxes. And I know because if you take if you take your crepuscule, I do.

Mat Sorensen: I want to you do our crazy.

Mark Kohler: You’re crazy, OK? Because some of you want to trade your crypto for one of these. Oh, the tesla.

Mat Sorensen: Video there what is that oh that’s the Tesla truck.

Mark Kohler: What is it? This is the this is my truck

Mat Sorensen: Although Elon says they’re not taking bitcoin anymore for environmental concerns. Can’t test is not taking accepting bitcoin right now.

Mark Kohler: When did he say this?

Mat Sorensen: Like 3 weeks ago. Yeah you missed that.

Mark Kohler: I can’t keep up was it on TMZ. Was it on the news?

Mat Sorensen: It was not no

Mark Kohler: If it’s not on TMZ. I don’t know what’s happening.

Mat Sorensen: It’s on the Twitter sphere. Yes.

Mark Kohler: Well, everybody. We’re glad you’re watching here. We have a regular podcast just on Self-Directed IRA strategies as well as a sister podcast on your side hustle your side gig and helping you make more money and pay at least the less amount, the least amount of taxes possible. It was a grammatical screw up, but we don’t keep it real here. We’re both just tax lawyers trying to have fun. You’ll see that we’ve got actually millions of downloads and views. And you’re like, how come I’ve never heard of these guys? Well, now you have. And we’re glad you’re here. We are going to break down this answer of cryptocurrency in an IRA, blow your mind.

Mat Sorensen: Yeah. So let’s start with the first thing is, can an IRA, a Roth IRA, 401k, can it own crypto? Yes. Yes, I can’t. We’ve been doing this for a long time. My very first video I shot on this was in 2017. Bitcoin was at $2,500. We’re teaching how you can use a Roth IRA in particular. Remember, Roth IRAs grow and come out.

Mark Kohler: You’re going to point number two. Point number one is an IRA can own

Mat Sorensen: I wanted the punch line though. Like that’s OK.

Mark Kohler: I’ll give you the punch line. Let me set it up for you. Point number one is IRAs can own crypto point number two, Mat, which is the best IRA to do this in.

Mat Sorensen: Well, let me go back to point number one now, actually, because I had another thing I want to say on that.

Mark Kohler: Gosh, I’m trying to help you make this smooth, but go ahead. Go ahead.

Mat Sorensen: I keep screwing it up because it’s important. OK, go ahead. You can do it in an IRA. We’ve simplified it at Directed IRA, where we link a Gemini trading account. Your IRA owns it. We put the money into that Gemini Trading Account. You can trade it 24/7, 365 a year. You do it all you want, OK? And all the crypto today you can trade. So that’s it’s the reality is there you can do it. That’s I just want to say a lot of people like try to figure it out. It’s complicated. We’ve simplified it. Just go to our site. We’ve got details on how to do it.

Mark Kohler: OK now before we get to the best type of IRA, which is point number two, let me may I. Add to your point number one, sir, from the state of Arizona, senator,

Mat Sorensen: I will yield,

Mark Kohler: Ok, there’s another interesting point for those out there that are cryptologists, we ought to have a word for that crypto crypto maniac’s crypto smart people, whatever. Robinhood is probably the largest platform people have found to trade crypto. But the problem is on Robinhood, you cannot have a Roth IRA. So you’re making a lot of money buying and selling that crypto, maybe a little GameStop, a little AMC, having a great old time. But the Pied Piper is going to come through your town next year in April and want some taxes. And it’s going to blow you away and you’re going to go. Well, I did it offshore or I did it. I bounced it off this URL, or this server or blah, blah, blah, or I did it in Nevada. I don’t owe. Nope, trust me, we are tax lawyers that have fought with the IRS in tax court helping clients for the last 20 years. This isn’t our first rodeo people. Crypto is just like any other frickin asset. And if you’re making money, the IRS is going to tax it. And Mat tell the IRS tax for 2020, 1040.

Mat Sorensen: Yeah. Look at page one on the 1040. Now, before you even put where your W-2 is, the IRS says did you buy, own, sell, receive virtual currency, whether talking about crypto. In the year 2020. They want to know this, we’ve all heard the news the IRS is beefing up enforcement, they think there’s a lot of underreporting in taxes on crypto, want to know the best way. Yes. And not even have to check the box and say yes.

Mark Kohler: Yes, I do. Mat Sorensen. Pray tell.

Mat Sorensen: Own it in your IRA, then you check no, because your IRA owns the crypto you don’t.

Mark Kohler: Now, we made the title of the show. Can you move crypto into your Roth IRA? So we want to get to the point. But point number one is you can do it. Point number two, Mat. I’ll let you steal thunder quickly. What is the best IRA to do crypto trading in?

Mat Sorensen: Well, the Roth IRA, because the beauty of the Roth IRA is when the money comes out later at retirement when you hit 59.5, it comes out all tax-free.

Mark Kohler: Now, some of your young people, you think that’s a bad deal, you think I’m 20 something, I’m 30 something, I don’t want to wait till I’m fifty nine and a half. I get that. But let me give me two seconds before you switch off this video or turn off your podcast. Number one, you can always access it if you have to. You’d pay some taxes. There might be a there would be a 10% penalty. But it’s not the end of the world if you need to get at it before you’re 59 and a half. You can number two. Just do it in both do some crypto in your Robinhood account and do some crypto on your Directed IRA account, do both. And number three, you would be shocked how many people Mat and I and our team of lawyers and accountants meet with people every frickin week that are in their 40s and 50s, scared to death with no retirement people. It’ll come faster than you realize. So build that account simultaneously with your Robinhood account. You can do both.

Mat Sorensen: Yeah. Or your Coinbase or Kraken and or all these other, you know, finance places where people are really buying a lot of crypto. But OK, so

Mark Kohler: The golden question, can I do it?

Mat Sorensen: Now? There’s bad news and good news.

Mark Kohler: OK, you give the bad news, I’ll give the good news.

Mat Sorensen: Ok, one more thing. I have to go like, you know, discipline an employee or something. We always do. The good cop. Bad cop. Yeah, I’m bad cop. Yeah.

Mark Kohler: I get to hire all the people. Mat gets to fire all the people so it works for me.

Mat Sorensen: All right. Here’s the bad news. The crypto you already have if you’ve already got crypto. That is stuck in your personal name, that exact crypto with that basis and what you bought it at. Maybe you bought it a really low price and it’s it’s appreciated highly. I don’t care what it is, you could have Doge, you know, Bitcoin, whatever it is that’s stuck, you’re not going to be able to do that. Let me

Mark Kohler: Let me say it a different way.

Mat Sorensen: You get the good news on it.

Mark Kohler: But see my art is I’m going to be honest, my talent is sometimes making bad news, not sound as bad as it really is. OK, so let me say this. Mat said we change the words. Can you wholesale all of your crypto and move it into a Roth IRA? No. But right now, this week we’re recording cryptos down this last two weeks, OK, this could be a good time to sell off some of it up to the amount you could contribute to a Roth right now. So you could sell some of the crypto, pay some tax on that portion that you sell. But don’t sell the whole thing, but start harvesting some of those profits, start taking six grand and Mat will give you some numbers here and what you can do, but start harvesting. We call it chunking. So let’s start chunking at that personal account and moving it to a Roth IRA or a Roth 401K. Oh, we’ve got all sorts of ideas, folks, but this is step one. What is that OK? Did that sound a little better?

Mat Sorensen: That did sound better. That was the good news part. So, you know.

Mark Kohler: No, no, no. There’s still better news on it. I’m down. But I’m just saying you can’t move it all, but you can get parts of it and start now. OK, how would you do that? Mat what it take you through the steps. How would you do it.

Mat Sorensen: Ok, so you could put six thousand dollars into a Roth IRA per year. All right. Now if you have a spouse, your spouse can also throw six grand in. Now some may find if they’re like the wait Mat, I’m high income, I make too much money. I’ve been told I can’t do a Roth IRA you can do the backdoor Roth IRA, you don’t get to go in the front door and put in your cigarette like everybody else, regularly. But you can what’s called a back door, a Roth IRA, where you make a nondeductible contribution and convert it to Roth. It’s just a two step process. We have a whole podcast episode on that. There’s a lot of content out there about Back-Door Roth IRA. And make sure if you’re searching around YouTube, you say Back-Door, Roth IRA to get to Directed.

Mark Kohler: We don’t want to be liable for what else you might see. You’re going in the back door to the Roth IRA to

Mat Sorensen: Make sure you’re on your own there. Roth IRA now.

Mark Kohler: Ok, now, one of the steps here, if I may add, is open your Roth IRA account first and get your wallet set up. Now, we have two ways you can do it at Directed IRA, the first fast and easy expedited slam bam. Thank you, ma’am, is the crypto IRA. We’ll have a link down on the show. Corey, can you put it in the show notes DirectedIRA.com/Cryptocurrency. Whatever the link is, you go straight to that cryptocurrency page. Open up a Roth crypto account, you will get a Gemini wallet within 24 to 48 hours, it’s just about moving money at this point. The faster you help in the process, the better. And then you can harvest some of the profits. And let’s say you’re Robinhood account and move it to your Roth account, which is tied to a Gemini wallet. That’s the fastest, easiest

Mat Sorensen: Now when Mark says harvest. What he’s saying is you’re sending cash, so you’ve sold some of your crypto or you use some of your other cash you might otherwise just have rather than buying more crypto with your fiat currency. Here’s I’m going to throw a six grand into my Roth IRA at directed IRA. They’re going to then put it into the in my Gemini wallet, which would be linked to a trading account on Gemini’s exchange. Now, you can just exchange right there fast. It’s quick. Your Roth IRA owns that. That’s not on your taxes or anything. It’s under your IRA with us. We have a strategic relationship with Gemini for those accounts. OK, now,

Mark Kohler: I was impressed Mat used the word fiat currency kind of showing off. I didn’t, you know. Oh, yes, showing off Mat Sorensen. OK, knows what he’s doing.

Mat Sorensen: Remember the Fiat cars. Yes. Remember those the Fiat. Do they make those anymore?

Mark Kohler: I don’t know. I really don’t. I don’t want offend some Fiat

Mat Sorensen: Fiat currency do they have that anymore.

Mark Kohler: Now for some of you, you’re going your crypto afficionados. Afficionados, is that the word of crypto aficionados? I say I don’t like the Gemini wallet. I don’t like the coins Gemini gives me to choose from. I want more variety. I want to do cold storage, not see I can throw down. So I. So you may want some more unique trading benefits. So option two is you would open a regular Roth at Directed IRA, then you get a consult with one of the lawyers and our sister firm, KKOS lawyers, who sets up a single member LLC owned by your Roth. Now you have an LLC bank account, which you’re the manager of. Then you would open up your Coinbase account, your Blockifi account, or I said it right. BlockFi or BlockFi.

Mat Sorensen: BlockFi yes.

Mark Kohler: I was just so many different things going on in my head, that inside voice. But you want to make sure that you set up.

Mat Sorensen: Let’s keep some of that there to yourself.

Mark Kohler: No disclosure. TMI, TMI.

Mat Sorensen: Yeah. OK, so the tax and IRA stuff coming out but held everything else back.

Mark Kohler: Yeah. It’s like it’s a floodgate Mat it’s a floodgate. I mean I don’t want the dam breaking open. OK, so, so you can have an LLC bank account funded through your Roth where you could open a wallet and do cold storage and things wherever you want, takes longer. And all the exchanges are, you know, catering to the big hedge funds with a billion dollars. They may not care about you for a while, but I tell clients, get the Gemini account going just so you can get some currency trades. Then I mean you at the same time, you could be working on this alternative path. You’re going to spend an extra thousand bucks getting the LLC set up and meeting with a lawyer, but they’ll tell you the rules in the pros and cons. And the nice thing is about that LLC, you could take your profits and buy real estate. You can buy other things with that LLC, just not in crypto. So it’s really a gateway drug to some extra investing.

Mat Sorensen: So yeah. Yeah. So yeah. And the LLC is a great strategy. I think we have that they should you could drive your drive and just hang up like Mark said is for particularly people new to crypto getting a wallet set up to an LLC bank account and getting on particularly the major exchanges like Coinbase or Kraken and or even Gemini with an LLC. Very complicated. Gonna take you a long time? All right. There’s others we’ve seen clients go faster with, like Bitrix and such that are that are more like a week turnaround time. But still you’re going to take is going to take some work for particularly people new to crypto to get those wallets set up to where they can get to start buying. But if you want the fast and easy and let’s say you’re only doing six thousand bucks or something, you’re not doing a large amount in particular. Just I just do the Gemini crypto IRA that we have. It’s so much faster and easier to get done and we handle it for you. You could be trading within a week by the time you get your money over here. Yeah, OK.

Mark Kohler: Now I want to give you the best strategy, ok. OK, so number one you can do it. Number two the Roth is the best number three you can bring over crypto you already have by selling off chunks of it in the dollar amount to rebuy and when cryptos down it’s a good time to do that, pay some of the taxes and be done with it. And I want to give you a tip on taxes to number four is start fresh. Just don’t even leave that personal account alone, let it keep flying high, doing whatever it’s doing, good or bad, whatever the case may be, don’t touch it. Maybe some of you were like, I don’t want to pay taxes on that. Fine. Leave it alone. Open a new Roth IRA or Roth solo 401k. We’ve got all sorts of strategies, hopefully you’re feeling like we are forward thinking creative guys. We own crypto ourselves. We’re trying to help clients do this every day. Look at some of our other videos on the solo 401k, having a backdoor 401k with your side hustle using rental property in conjunction with coin trading. I mean, there’s so many little strategies we talked about every week. Please get it. Get that process going of education on this topic. We won’t let you down, I promise. So just open a Roth IRA. We even just shot a video on how to open Roth IRAs for your kids. You know, I want to open a Roth IRA for my mom, make me the beneficiary and trade crypto in my mom’s Roth. Boom, you can do that.

Mat Sorensen: Yeah. APSA frequenlutely

Mark Kohler: Oh that’s a technical term.

Mat Sorensen: Yes. Yes. That means yes. Yes, you can.

Mark Kohler: You know what? I’ve got a new term for what you’re doing. You’re the bad guy, Stuntman.

Mat Sorensen: The bad guy stuntman.

Mark Kohler: Yeah. Like when there’s a really crazy bad stunt where I could get hurt.

Mat Sorensen: Like someone’s going to die. Yeah. the bad guy always dies, right. And the stuntman has to be the guy to do it.

Mark Kohler: I just mean you’re the bad news stuntman. The bad news stuntman. You come in, take it for the team and then go lick your wounds.

Mat Sorensen: Then the hero comes in.

Mark Kohler: Yeah. I’m the lover stuntman, you know. Oh yeah. Because like, well, we got a love scene. We need someone with a good thought. Let’s bring him in and I come in I’m the lover stuntman. Whenever there’s good news.

Mat Sorensen: I think I call it sounds accurate. Yeah.

Mark Kohler: That’s kind of like calling the front seat in the car. You know shotgun.

Mat Sorensen: I call love scene stuntman ah man I’ve got to sit on the hump in the back. Oh man.

Mark Kohler: Oh, there you go. All right. Well, Mat, any final tips on Roth we have so many videos and podcasts and a book where Mat Sorensen book. There it is. I’m going to go grab it.

Mat Sorensen: Yeah. The Self-directed IRA Handbook currently in it’s second edition and there’s a chapter on cryptocurrency and the book. Twenty bucks on Amazon or on site at SDIRAHandbook.com. OK, I just gave the plug there.

Mark Kohler: Oh yeah. Here’s Mat book, the self-directed ira handbook second edition. Go get it today. Now if you really want to save money and make more money, go get the tax and legal playbook by Kohler Mark.

Mat Sorensen: That’s a good book.

Mark Kohler: But yeah it’s good, it’s good to do that right there. OK, it’s like doing it in a mirror. It’s a little backwards. OK, tax legal playbook Self-directed IRA handbook these people the playbook and the handbook. You’ve got to have these in your library to build wealth. I know there’s a lot of great podcasts and videos out there by Grant Cardon and others making tons of money and helping you make money. That’s cool. We’re there to save you money. We want you to pay less in taxes. And if you get in a lawsuit, no one can touch it. That’s what we do. Yin and yang. You got to do both. You can’t just watch the sexy videos and the sexy podcasts and go, Oh, I’ll figure out my taxes later. Which brings me to my tax tip. If you harvest any cryptocurrency profits, I’m going to tell you take 25% right off the top and put it in a tax account to pay taxes. Once you get through capital gains, even short term capital gains and your standard deduction, yada, yada, yada. I have other videos Mat and I have shot some videos on capital gains and tax strategies for crypto. I’m just going to say it boils down to an effective tax rate of between 20 to 25 percent. Now, that’ll get you through the federal. If you’re in a state where there’s state tax, you’re going to pay it. Nevada is not going to help you, I hate to tell you. So I’d set aside 25 to 30 percent and be done with it. There’s your tax.

Mat Sorensen: So, yeah, there you go. And then slowly transition, like we said, over to the tax free vehicle of the Roth IRA. And I like what Mark said too do both. It’s not like we’re saying do all your crypto in a Roth IRA. We’re just saying if you really believe in it that it’s going to go to the moon, why not have your retirement account invested in it, particularly a Roth IRA. It can come out tax free. How the other piece of your what you’re wanting to invest personally that maybe you’re owning personally and you have more access to that, greater access to it. You pay the toll of taxes to the IRS. Congratulations. You live in America. That’s just the American way. We can’t help you there.

Mark Kohler: Yeah. Now, if I was running SpaceX, I’d have two ships to the moon. Why not diversify? I’m going to send it to space shuttles. I believe crypto is going to the moon. I’m going to load up two space shuttles once tax-free. One, I pay tax. And that’s OK. I’m hedging. I’m hedging against risk that way. Did you like that analogy? That was.

Mat Sorensen: I think so. I was starting to think about the Jetsons and I was going to make a joke about this topic, you know, nothing came to mind I got nothing.

Mark Kohler: Well, Mat take us out, give everybody a word of wisdom and tell them thank you.

Mat Sorensen: Well, I just want to say there’s so much you can do with a Self-directed IRA Crypto has been the hot topic. You’ve been able to do real estate, invest in private companies, startups. All these things are the strategies we’ve been teaching on the directed IRA podcast. So if you want to learn more about that, you can go back to Episode one, where we start with the basics and build on the topics. Check it out at DirectedIRA.com/podcast. And thanks so much, of course, for listening. We’ll be back next week with another amazing episode about how to take control of your retirement using a Self-directed IRA or 401k.


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