Disclaimer: We are not licensed tax experts. This is for informational purposes only. You should consult your own financial advisor before making any investment decisions.
This article discusses how you can invest in crypto tax-free using a self directed IRA or solo 401K.
Traditional IRAs or 401k’s, limit what you can invest in. Typically, they only allow stocks, bonds, mutual funds and other common “wall street” type investments.
However, many people do not know that they can roll their funds from a traditional IRA or 401k to a self-directed IRA. These accounts allow you to place your funds in alternative investments such as real estate, precious metals, privately held companies and crypto. You will receive the same tax-sheltered treatment as any other investment in your retirement plan.
There are two main types of self directed retirement accounts. Custodian controlled and checkbook controlled. Custodian controlled accounts allow for alternative investing. However, there is a caveat. Your investment must be approved by the custodian first. While a custodian controlled self-directed IRA is better than a regular IRA, it doesn’t give you complete freedom.
The other option is the Checkbook Control IRA. Just like its name describes, it offers clients total checkbook control of their funds. You have a dedicated bank account linked to your self-directed IRA allowing you to make the investment decisions yourself with no approvals needed. The IRA service provider is a passive custodian that will never tell you what you can and cannot invest in. They are simply there to set up the account and ensure it remains in compliance with IRS rules.
If you would like to diversify your retirement portfolio by investing in crypto, look into opening a self-directed IRA.