How to Trade Crypto Tax-Free Using a Crypto IRA

Transcript:
(00:00) you can make money investing in crypto and pay zero tax on it but you need to use the legit strategies the one sitting out there in plain sight that is the best strategy tried and true is simply using a Roth IRA and Roth 401k now I know a lot of people think Matt Roth IRA is Roth 41k is that’s providing stocks bonds and mutual fund how’s this apply to crypto where your IRA or 401K can actually own crypto as an investment asset I did this in 2017 myself when I bought crypto at 2500 bucks for BTC check out my 2017 video on it it’s even
(00:27) time spam you can see where I talk about is Bitcoin even worth $25 00 per BTC I don’t know but I went ahead and did it and made the investment now my company directed Ira in 2021 launched a crypto Ira product in collaboration with Gemini where you can go on Gemini exchange with the wallet owned by your IRA Roth IRA Health Savings Account whatever account you like use those qualified tax deferred or tax-free funds to buy the cryptocurrencies you like there’s over 50 cryptocurrencies you can purchase on the exchange now why does this matter
(00:54) why should you even care about this well if you believe in crypto and you want to build long-term wealth why would you not do it in retirement account Roth IRA grow and come out totally tax-free at retirement the money in your Roth IRA all that money that you make whether it’s in stocks or mutual funds or crypto grows with no taxes you buy and sell you trade every day I don’t care it’s not going to show up on your 1040 return you’re not paying taxes to the IRS it grows and grows comes out later at retirement once you at 59 half totally
(01:23) tax free That’s The Power of a Roth IRA or Roth 401k but you can’t just go to TDM trade and open this account up you need to use a provider that allows you to invest in crypto like our company where they have a crypto Ira now I’m going to go over different fees and providers and the things later on in this video do you know what types of accounts to open and what type of fees to expect whether you’re using us or using another company let’s just go over a quick example here on the crypto I purchased in 2017 and that time BTC was
(01:47) $2,500 per Bitcoin I purchased two that’s a price of $5,000 total to buy two BTC right now BTC is trading at 70,000 it’s going up and down but it’s at 70k right now so 2 BTC would be 140k now right there alone I have $130,000 gain on that BTC now I’ve had clients do far in excess of this far better than I ever did but the benefit here to me is that whole 130k in gain zero tax now I’m going to hold this and I’m going to continue to invest and want to grow it until I later get to 59.
(02:16) 5 which is when I’ll pull this out but that whole $130,000 gain how much taxes owed zero if I would have invested in this personally and I have purchased crypto and own it personally but the tax I’m paying over there on $130,000 gain is at least going to be 25 to 30% when you add long-term capital gains rates of 20% and your state tax into the mix I’m at least paying 25 to 30% on that and that differs depending on the state you live in whether you have state income tax or not you might be in a zero tax state like Texas or a 133% tax state like
(02:43) California but the taxes due on this could be huge and so using the Roth IRA or retirement accounts lets that money grow and come out taxfree and you get to keep all the profit all right now let’s get into the mechanics and how you actually set this up the first step you need is a crypto Ira if you’ve got money at an old Ira or or an old 401k maybe it’s a TDM era trade or an old employer 401k and you’re like yeah I don’t know what I ever want to do with that money I’m not excited about buying more stocks bonds than mutual funds did you know you
(03:09) could invest in crypto with it do you know that old 401K with 15K sitting over there you haven’t touched forever you could actually roll that to a self-directed IRA we’ll use what we call a crypto Ira at our office in that crypto Ira that 15K gets rolled over and then the crypto Ira gets link to a wallet at Gemini so let me make sure you understand that you’re going to have an IRA account we call it a crypto IR cuz it can buy an own crypto but it’s simply an IRA account there’s no tax moving from TDM trade to a crypto Ira at
(03:36) directed Ira it’s taxfree you can move the whole thing you can move a partial amount just roll over the hold employer 401K you got a tdmr trade account with 100K in it you might want to just move 50 to do crypto maybe it’s 10 whatever amount there’s no tax to do this there’s no penalty You’re simply choosing the provider of the retirement account and changing that up now when you’re at directed Ira where you have the crypto Ira that Ira is linked to a Gemini wallet so we have relationship and collaboration with Gemini where we’re
(04:02) going to fund US currency you’re going to have fiat currency in your wallet at Gemini from there you’re going to decide what crypto to purchase and when you can trade it you can day trade it you can just buy and hold it but you have access to your crypto 24/7 you can trade 365 days a year it’s right there on Exchange at Gemini now for those of you that don’t like that you don’t like Gemini you don’t like being on an exchange that’s fine there’s other strategies for this I’m going to come to that strategy next but the simplest and most easiest
(04:28) option to purchase crypto is using the crypto C Ira with our account that’s a crypto IRA account this could be a Roth account a traditional account a SEP IRA a health savings account all these account types work but you’re linked to a Gemini wallet and on the Gemini exchange it’s an easy solution because we’ve collaborated with Gemini to simplify it for you now for those of you that don’t have an old employer 401k or an IR to transfer over you can start from scratch you can start with a IRA and make your first year contribution of
(04:54) $77,000 for 2024 by the way until April 15th you can still make your $6,500 contribution for 2023 now you’ve got that 13,500 that you could put into account to go invest and purchase new crypto now for those you don’t have existing dollars to roll over from an old employer 401k or an existing broker dealer Ira you still have options you can just make new contributions you can put 7K a year into your crypto Ira if it’s before April 15th you can still do last year’s contributions as well now once that account is funded with your
(05:24) new contributions it’s the same process your crypto IRA account is linked to a Gemini exchange wallet the money gets over there in Fiat and you’re off and running to go purchase and sell the crypto you want trade whenever you want hold whenever you want now I mentioned a second option for those of you that don’t like being on an exchange you didn’t want to use gemini or maybe there’s a cryptocurrency that’s not on Gemini you want to purchase there’s another option here which is really the original crypto Ira option I did in 2017
(05:49) in this strategy you have an IRA and this is a self-directed IRA not a crypto Ira we call a self-directed IRA but it’s funded in the same way you got an old employer 401K you got a broker dealer Roth IRA or traditional IRA you roll that over or transfer it to directed IRA and in this instance you’re going to have what’s called a self-directed IRA now that self-directed Ira is going to open and set up an LLC and the IRA will own the LLC 100% you can be manager of the LLC you don’t own the LLC your IRA owns the LLC and the Ira’s put the cash
(06:18) in the LLC and has an LLC Bank checking account now as manager of the LLC you can then go open up a business or institutional account for the LLC you’re going to need to get on Exchange somewhere to convert the currency the Fiat dollars over to cryptocurrency now clients have used many different providers over the years Kraken has been a popular one they have a pretty easy business or institutional wallet setup you can use whoever you want when I did this back in 2017 I used coinbase nowadays it’s way harder to do this at
(06:44) coinbase because they don’t accept institutional accounts unless you’re some big hedge fund or billionaire but the point here is you’re buying crypto and getting on an exchange now a lot of you might be like well Matt I thought that’s what we didn’t want to be I didn’t want to be on Exchange not my keys not my crypto I get it okay you’re only there temporarily then you’re going to take the keys off exchange you’re going to take the crypto off exchange you can use some Hardware wallet like a nano Ledger a traser you can use
(07:06) whatever you want to get it off exchange now remember you don’t own this crypto your IRA does the LLC would need to purchase this Hardware wallet and pay for the cost of it the LLC is going to have a bank account still and you’re going to want to keep a bank account in the llc’s name because eventually that crypto if you may sell it or bring it back on Exchange to sell when you’re ready cuz now you’re ready to go exchange it you’re going to get to US dollars so you’re going need to send that back to the LLC bank account so
(07:31) really the concept here of using the IR LLC is if you want to keep the crypto off exchange you want to be in a hardware wallet for security purposes or maybe there’s other crypto you want to purchase that’s easier to do off an exchange now the critical part here when you’re using the irlc to purchase crypto is you need to have good records now this Hardware wallet is kind of a pioneering strategy the IRS hasn’t given the indication of whether you can do this with an IRA using an LLC where you actually have possession of the hardware
(07:55) wallet one of the analogous situations here is precious metals a lot of people use IR to buy real estate that’s totally fine lots of cases lots of precedent on that some people have used IR LC’s to buy precious metals there are some negative cases on that where people have stored the precious metals at their home a lot of people have thought does this apply to crypto should I be worried about this for my irlc not really there’s a specific provision in the tax code for precious metals owned by an IRA that says they must be stored at a bank
(08:21) or trust company you can’t personally store precious metals owned by your IRA and that’s a specific provision in the code that’s mandatory for precious metals there’s nothing in the tax code AS to cryptocurrency on this issue so that’s why I say it’s kind of a pioneering issue there’s not a case for it or against it typically the law says what you cannot do though so in this instance we don’t have a case or example or a law to say you can’t do that strategy I’m just saying it’s a little pioneering because it hasn’t been tested
(08:48) yet there hasn’t been cases buying crypto in your retirement account having it stored an exchange someone like Gemini which is a trust company and licensed and regulated I don’t see any issue with that we haven’t seen any concerns with that from a regulatory or any the tax court cases or from the IRS now what fees should you expect in this process our crypto Ira product which is the simplified version is a 295 annual fee 50 bucks to set up the account and then you have a half a percent trade fee when you buy and sell crypto so if you
(09:13) did a $10,000 trade that’s a $50 trade fee all right so that’s how the trade fee works up whether you’re buying or selling crypto now that’s the easier simplified solution less work on your end using the irlc structure cuz you want to use some other exchange or you want to have a hardware wallet and go off exchange that’s a little more expensive the annual fee for a self-directed IRA is $3.
(09:34) 95 $50 new account setup fee and then a $50 transaction fee to purchase the LLC interest now the LLC is also going to cost you some money which is 1,200 bucks so this strategy might cost you around $1,500 to $2,000 to set up using the irlc structure but if you’re purchasing a lot of crypto you have zero trade fees you’re only subject to The Exchange Trade fees there’s no separate trade fees on our end and you’re in more control you could have multiple accounts of course you could have the Hardware wallet so there’s more benefit and
(10:01) upside to it for those that need it if you want a simple straightforward solution at a low cost though the crypto Ira in connection with Gemini is really the way to go now some of our competitors have different fee structur and I make sure you understand what’s out there so you know what to expect and are calculating it properly some companies have zero annual account fee but they have a higher trade fee it might be a 2% trade fee so you just want to look at your situation how much crypto are you looking to buy are you
(10:23) going to hold this for the long term are you going to trade it sometimes you might be better off actually with another company based on a fee level now I don’t know from customer service and everything there I think we’re the best of course but there’s different fees out there of what you can expect so just make sure you’re looking at the different fee structures from Annual fees to higher trade fees or what we do is kind of a combo of both a low trade fee with an annual fee I want to go over a couple things people screw up in the
(10:44) process and some common questions that inevitably come up first can I move crypto I already own over to my Roth IRA and then sell it and pay no tax no that causes what’s called a prohibited transaction you cannot do that we’re talking about buying crypto we’re talking about buying a new crypto we’re not talking about moving existing crypto you own over to your retirement account and then selling it from your retirement account and paying no tax that doesn’t work the IRS knew that they thought about that for all assets that’s
(11:08) restricted you cannot move personal assets you already own into your retirement account what we’re talking about here is your IRA crypto Ira in this instance buying new assets buying new crypto as a new investment now other question a lot of people ask is what types of accounts can I do this with you can do this with a Roth IRA traditional IRA HSA covered education savings account those accounts can all be self-directed those accounts can all buy crypto you just don’t have to buy stocks bonds and mutual funds with that account
(11:32) but another cool thing you could do is a Roth IRA for your kids if your kids have earned income you can set up a Roth IRA for them where that Ira can go out and buy crypto that’s a really cool strategy we’ve seen a lot of clients do now your kids have to have a job to have some earn income but if you’re a business owner you got some rental properties that’s a great way to put them to work pay him some money it’s a great tax strategy for you by the way because it’s deductible they pick it up as income not taxable to them and then they use that
(11:56) money to go open up a Roth IRA by crypto or other assets where they’re building long-term taxfree wealth now I have an article on this at cryptopedia make sure you check the description below to get the link to that also to book a call to talk to my team about how to actually do this click here they will help you walk through the process talk about your existing retirement account funds how they can be used or making new contributions so you can Off to the Races with a crypto IRA and lastly please make sure you’re subscribe to the
(12:21) channel I’m going to be back here every week dropping new videos we go live every Monday at noon I want to help you better take control of your financial future we’ll see you next time