Checkbook IRA, QRP & 401k Crypto Investments

If you’d like to set-up a Cryptocurrency IRACryptocurrency Solo 401k, Cryptocurrency QRP, Cryptocurrency Defined Benefit Plan, or Cryptocurrency HSA – this page provides the compliance information you need to do so.

What is Cryptocurrency? What is Bitcoin?

  • A Cryptocurrency is an alternative to government issued money – “fiat” in industry lingo – with some very attractive characteristics that make it superior to the money we currently use.
  • The Blockchain technology upon which cryptos are built provides for secure, decentralized, anonymous, and near-instantaneous global transacting.
  • The Crypto-community advocates for the replacement of fiat with virtual blockchain-based money. Bitcoin, or BTC, is the most widely recognized digital currency.

As Bitcoin adoption increases, it’s value may grow astronomically – thereby creating wealth for owners of the cryptocurrency. Over the recent period, Bitcoin and other virtual currencies have seen astounding growth in value and global interest, creating many Bitcoin millionaires. Many others have reaped incredible profit through crypto trading and speculation. This has spurred demand for tax-free Bitcoin IRAs, Bitcoin QRPs & Bitcoin 401(k) plans.

  • Use your Checkbook Retirement Account to easily and cost-effectively invest in unlimited crypto investments, with the potential for incredible gains.
  • Be part of a movement that is creating the future. We don’t know what the future holds but Blockchain will certainly be part of it.

Why use a Self-Directed Retirement Account For Crypto Investing?

  • Eliminate Crypto Tax Filing Requirements
  • Eliminate Crypto Tax Record-Keeping Requirements
  • Eliminate Crypto-Tax Liability

Currently, the IRS treats cryptocurrency as property, not money (currency). This treatment requires recognition of taxable income or gain whenever cryptocurrency is sold or traded – even if you do not receive any fiat USD in exchange for your crypto. Although your actual gain is recognized and denominated in cryptocurrency, you must pay the IRS in US dollars. US taxpayers must calculate all their income and losses on all their transactions for IRS tax reporting and pay taxes on their net gains. See IRS Notice 2014-21 for details.

  • Tax-advantaged retirement accounts are a very attractive way to buy and sell crypto and avoid all IRS liability.
  • Roth SDIRAs, Roth QRPs & Roth Solo 401k plans are particularly attractive for Bitcoin & crypto investments, being that the potential gains have been – and are expected to be – astronomical; with a Self-Directed Checkbook Roth retirement account, all those gains will be completely tax-free, forever.
  • Traditional SDIRAs, Traditional QRP & Traditional 401k crypto investing will eliminate all crypto tax filing requirements and all crypto tax liability. However, all funds within Traditional, pre-tax, retirement accounts will be taxed when distributed from the account.

Cypto-to-crypto 1031 Exchange For Cypto-Tax Deferral

  • Prior to US Tax Reform implemented in 2017, some US crypto investors took the position that crypto-to-crypto trades were exempt from tax as 1031 Like-Kind Exchanges.
  • As a result of US Tax Reform, for 2018 tax year and onward, 1031 like-kind exchanges apply to real estate only.
  • Today, tax-advantaged retirement accounts – Checkbook SDIRA, Checkbook 401k & Checkbook QRP – are undoubtedly the most effective vehicle to manage & eliminate crypto tax liability.

Why use a Checkbook Control Retirement Account?

  • Flexibility: With Checkbook Control of your crypto assets, you can invest in the crypto assets of your choice, using the crypto exchange of your choice. You are not limited to the availability of crypto on a particular platform. Get in on alts, Initial Coin Offerings, ICOs, exchange arbitrage, and all other cryptocurrency investment strategies.
  • Cost-Savings: With a Checkbook Control Crypto IRA, you pay only a low flat set-up fee. There are no asset-based fees, no percentage fees, or transaction fees.
  • Security: With a Checkbook Control Crypto IRA, you may be able to hold the assets in a hardware wallet – Trezor, Ledger Nano, or other form of cold storage –  rather than relying on the security of a platform.

Checkbook Crypto Compliance

Be aware of prohibited transactions. Avoid investing a Self-Directed Crypto IRA with entities controlled by the IRA owner or other disqualified persons as defined in Section 4975 of the Tax Code. Crypto that you or any disqualified person hold personally should not be moved to your Crypto IRA, Crypto QRP or Crypto 401k. Nor should any crypto that is held by your IRA/401k be moved to the account of a disqualified person.

The investor is the Checkbook Retirement Account. All paperwork and documentation should be in the name of the investing entity, which may be your IRA-LLCSolo 401k, Solo 401k-LLC, QRP, or Defined Benefit Plan. Exchange accounts should be titled in the name of your IRA-LLCSolo 401k Trust, Solo 401k-LLC, or Defined Benefit Plan.

UBIT, UBTI, UDFICertain investments may result in taxable income to retirement accounts. For crypto investors, this is most likely to apply to crypto mining operations within an SDIRA, 401k, or QRP.

No S-Corp investments for IRAs: Having an IRA as an equity partner in a business that has made an S-corp tax election would result in revocation of the business’s S-corp status.