Investing in Cryptocurrency with a self-directed IRA

Cryptocurrency provides a way to trade goods and services across the globe without government regulation or centralized oversight. Cryptocurrency (or digital) transactions are performed on self-regulating platforms that are visible for the public to see. This self-regulation ensures stability, prevents double spending, and helps create longevity to ensure value as a viable currency or asset within the broader scope of e-commerce.

Digital currency is bought and used by individuals, vendors, businesses, and even countries who allow its use. Investing in cryptocurrency like Bitcoin, Litecoin, Ethereum, and others is possible in a self-directed IRA. Profits earned in a self-directed IRA with cryptocurrency are paid directly to the IRA without any taxable liability other than those that apply when you retire.

What Is a Self-Directed IRA?

Self-directed IRAs work the same way and follow the same rules as conventional IRAs. But, conventional retirement plan assets are limited to traditional investments (stocks, bonds, mutual funds) chosen or sold by the plan administrator.

Self-directed IRA investments are not restricted to stocks, bonds, and mutual funds like conventional IRAs are.

Self-directed plan owners choose their own assets, and they have access to a much broader category of alternative investments to the stock market. Things like real estate, private equity, gold, and cryptocurrency are examples of alternative investments that can help you build retirement wealth in a self-directed IRA.

Benefits of Digital Currency in a Self-Directed IRA

When you trade cryptocurrency personally, you are required to report any gains on your tax return. You must also report goods or services you purchase with crypto. When you’re investing in the fast-paced environment of digital currency, this can be quite time-consuming to properly track.

But, when you trade crypto as an investment in an IRA—the gains enjoy tax-free growth in the account. For example:

  • If you have a Roth IRA, earnings are not subject to tax when you take distributions in retirement provided you are over 59 ½ and have owned the account for 5 years.
  • With a traditional IRA, earnings are tax deferred. You pay tax when you take distributions in retirement.

Three ways to invest in Cryptocurrency

Cryptocurrency investments in a self-directed IRA offer users multiple ways to start investing in digital currency.

  1. Buy and sell like forex and futures trading on an online platform
  2. Invest in the blockchain mining process
  3. Invest in Bitcoin Trust, ETFs, and hedge funds


How the Process Works in an IRA

  • Choose a platform that can title the ownership in in your IRA’s name.
  • Cryptocurrency may not be purchased personally and sold to your retirement plan.
  • Make sure the platform’s investing procedures comply with IRS rules and regulations.
  • For income tax reporting purposes, digital currency is deemed personal property by the IRS as stated in Internal Revenue Bulletin 2014-16, Notice 2014-21.
  • When held as an asset in an IRA, it receives the same tax-sheltered treatment as any other investment in your retirement plan.

Why Advanta IRA?

As the nation’s premier self-directed IRA administrator, Advanta IRA provides professional, personal service to clients who invest in many different alternative assets. Each of our clients enjoys one-on-one assistance from a dedicated account manager who helps them throughout the investing process.
When you work with us, Advanta IRA’s team ensures the administrative details of your digital IRA are taken care of so you can spend your time focusing on your investments.

For your digital IRA:

  • Advanta IRA has secure, onsite cold storage where crypto is stored on personal hardware devices.
  • We don’t charge commission.
  • We allow any cryptocurrency supported by the Ledger Nano platform.

Advanta IRA allows cryptocurrency assets in each of these plans.

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