Tag: Bitcoin

How Is Crypto Taxed in the United States?

It’s important for investors, including those with cryptocurrency IRAs, to understand how taxes affect their accounts. Cryptocurrencies are treated as property according to the IRS, just like many other investments. Every sale may cause a taxable event, with only a few exceptions. But if you hold your cryptocurrencies within a crypto IRA, you may receive tax-free or tax-deferred growth, depending on the account type.

There are some instances where certain activities that involve cryptocurrencies can be treated as income, and thus be subject to income tax. When cryptocurrencies aren’t within crypto IRAs, capital gains taxes typically apply when any of the following events occur:

• Selling cryptocurrency for traditional currency.
• Using cryptocurrency to purchase goods and services.
• Trading one cryptocurrency for another on an exchange or peer-to-peer.

Income tax may be applied when any of the following events occur:

• Receiving cryptocurrency from an airdrop.
• Interest earned from decentralized finance lending.
• Income earned crypto mining from block rewards and transaction fees.
• Crypto earned from liquidity pools and staking.
• Receiving cryptocurrency as a means of payment for services.

Do You Have to Claim Taxes from Holdings in Your Bitcoin IRA?

It’s important to see a crypto IRA as a long-term investment in order to refrain from taking distributions before the retirement age of 59½. This is because early withdrawals may be subject to tax penalties, unless the withdrawal is for specific hardships  defined by the IRS.

Will BitcoinIRA Send Me a 1099-Form?

There are several different types of 1099 forms that you may receive regarding your cryptocurrency investments; you may receive all of them, some of them, or none of them. As cryptocurrency continues to become more federally regulated, all cryptocurrency exchanges may need to comply with regulations concerning the creation of proper tax documentation.

Here are brief descriptions of the various 1099 documents that may be entailed by cryptocurrency and IRAs.

1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contract, etc.: IRS information can be reported on a 1099-R if there is a distribution of $10 or more. Plan or account custodians typically issue a 1099-R for the IRS, recipient, and state or local tax department. If you receive an eligible distribution from accounts such as IRAs, profit-sharing plans, retirement plans, pensions, annuities, and so forth, you should get a 1099-R.

1099-B: Proceeds from Broker and Barter Exchange Transactions: A 1099-B form will display all your transactions by showing the purchase price, sales price, and any resulting gain or loss from the sale of crypto.

1099-INT: Interest Income: A 1099-INT form will show interest income that is taxable as ordinary income.

Can Taxes Be Avoided by Investing in a Bitcoin IRA?

Yes, some taxes can be avoided by using a Bitcoin IRA. We offer two types of cryptocurrency IRAs, Traditional and Roth. Traditional Bitcoin IRAs are tax-deferred, whereas Roth Bitcoin IRAs can potentially grow tax-free, depending on the assets chosen. Also, avoiding taxes on capital gains could potentially save you money. This means you’ll be able to enjoy more of your own money during retirement, as opposed to other investment strategies that don’t offer such protection. That said, it’s helpful to remember that you can be subject to penalties if distributions occur before you reach the age of 59½.

Does the IRS Track Bitcoin IRA Activity?

Technically, the IRS cannot track every Bitcoin or cryptocurrency transaction and is instead relying on individuals to comply in good faith. It has only been since 2014 that the IRS has begun to tax cryptocurrency. Since then, they have mainly targeted individuals who have had at least $20,000 in transactions in any given tax year.

For example, the IRS has historically filed court summons’ that seek similar information from other exchanges. In one example, the IRS requested account registration information, account activity records, and other materials for customers (who had at least $20,000 in transactions in any tax year from 2016 to 2020) from Circle Internet Financial, a cryptocurrency exchange based in Boston.

In recent years, the IRS has filed other court summons seeking similar information from other exchanges. However, the IRS doesn’t track every crypto transaction. Because crypto is treated like stocks, bonds, or other capital assets, you are required to be fully transparent with the IRS on your tax return. This means your tax return will need to indicate if you’ve transacted in cryptocurrency.

Essentially, it is up to individuals, currency exchanges, and cryptocurrency IRA firms to report transactions and to produce 1099 tax forms each year.

How Do I Report Taxes on My Cryptocurrency IRA Savings?

As long as you keep the money in your Bitcoin IRA, you should not need to report any gains or losses on your investments. That’s because IRAs are tax-sheltered. What this means is that no taxes are incurred while the money is in the account. Once you begin to take distributions from your IRA at retirement age, you will need to take possible taxes into consideration

Short-Term Capital Gains Tax

Short-term capital gains taxes are often higher than long-term capital gains taxes. For example: For the 2022 tax year, if you purchase crypto for $50,000 and then sell it for $150,000 six months after you purchased it, you will pay short-term capital gains taxes on $100,000. Short-term capital gains are subject to taxation as ordinary income at graduated tax rates. IRAs are often used to help individuals avoid capital gains tax because capital gains tax will not apply to distributions from a retirement account

Long-Term Capital Gains Tax

Long-term capital gains tax is applied to the profit from the sale of any property that has been in one’s possession for more than one -year from the purchase date. The term “property” is applied to real estate, precious metals, stocks, bonds, and cryptocurrency. The tax rate is determined by a graduated threshold for taxable income at 0%, 15%, or 20%. As mentioned above, you can use an IRA to defer paying taxes as you will not be taxed until money or assets distributed from the IRA

BitcoinIRA is the world’s first, largest, and most secure cryptocurrency IRA platform used by more than 170,000 users. BitcoinIRA clients can take advantage of the numerous tax benefits that an IRA offers while investing in the long-term potential that cryptocurrency brings. In addition, users can buy and sell online any time with the BitcoinIRA platform, which contains built-in live price tracking, portfolio performance metrics, and educational articles and videos. Our platform offers world-class security¹ with up to $700² million custody insurance.

If you’ve been considering entering the crypto market but are unsure of how to begin, signing up for with BitcoinIRA could be a great way to plan for your future and your long-term financial goals.

Buy & sell crypto online 24/7 using an industry-leading platform. . . get started with Bitcoin IRA today!

¹Security may vary based on asset chosen and custody solution available.

²Insurance may vary based on asset chosen and custody solution available.

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First came the World Wide Web, which connected businesses, technology and people across the globe. Then, Web 2.0 introduced the rise of platforms, apps and interactivity for users.  

Blockchain technology has helped create the next evolution of the internet: Web 3.0. As Web3 continues to evolve, it is focused on decentralization, data security, and user privacy and it integrates cryptocurrency and other token-based economics.  

The rise of Web3 could help investors make trades and utilize cryptocurrencies in their IRAs and other retirement accounts while keeping their data private.  

What is Web3? 

Like other products, the internet has gone through transformations and transitions for its users. Those who remember Web 1.0 experienced a read-only version of the internet, which meant that viewers could read content but not really otherwise interact with it.  

In Web 2.0, users can post, “like,” subscribe and help add to the content that exists on the internet. One concern that some users have of Web 2.0 is the ease of data collection and privacy issues. By using data mining, companies can target ads based on how a user browses or utilizes the internet.    

The movement to Web 3.0 combines the first two—allowing for reading and interaction—but it decentralizes ownership and theoretically lets users own their parts of the internet. That means that as users browse Web3, their digital identity is no longer connected to their physical identity.  

Web 3.0 and Your IRA

Web 3.0 is expected to encompass nearly anything blockchain-related. As online retailers have begun to accept payments in cryptocurrencies, that can be considered a Web 3.0advancement. Investors are able to take advantage of this by buying Bitcoin, Ethereum, or other widely accepted cryptocurrencies.  

Another way that investors can try to benefit from the Web3 movement is to consider its different projects. Take decentralized autonomous organizations, or DAOs, for example. DAOs are designed to replace traditional company boards, giving token holders voting rights to company decisions. 

To better understand how DAO-type coins could work in an IRA, consider two (of the many) cryptocurrencies that Bitcoin IRA allows investors to purchase: Uniswap (UNI) and Compound (COMP).  

Uniswap (UNI) is crypto associated with an exchange that runs off the Uniswap protocol. In a nutshell, Uniswap decentralizes the security of traditional banking transactions and the authentication process.  

Another DAO coin, Compound (COMP), also facilitates transactions, but it is not an exchange. Compound gives owners the ability to lend and borrow the cryptocurrencies it supports at higher returns than typical savings accounts.  

DAOs also have the potential to make money through dividends, depending on the goal of the project. Commitments to DAOs are just one way that Web3 could aid investors. As Web3 is being built, investors could also leverage the decentralization of corporate infrastructure for long-term financial gain.   

How to Invest an IRA in Crypto 

Bitcoin IRA is helping Americans invest retirement funds in the world of crypto. It’s the world’s first and most trusted crypto IRA platform that offers 24/7 trading and allows users to buy, sell and swap more than 60 cryptocurrencies for their self-directed retirement accounts.  

As investors learn more about Web3 and how it can aid in retirement, they can quickly open a Bitcoin IRA account to start investing in crypto today.  

Recommended articles: Guide to Cryptocurrencies in a Roth IRA

Crypto Investing Myths Debunked

Opening an IRA is certainly exciting! It means that an investor has made the commitment to making a potentially comfortable retirement a priority.

Two simple ways to fund a new Bitcoin IRA account are rolling over retirement funds that already exist or by making contributions directly from your bank account. But what about after that is done?

Should investors keep their contributions coming, and if so, what and how much? Here are some ideas to help you decide how to continue funding your self-directed retirement account with Bitcoin IRA.

Funding Your IRA Account

After creating a Bitcoin IRA account, you may continue to fund it in a few ways. One option is to set up recurring contributions. Investors with excess or disposable income from their regularly occurring paychecks can automatically transfer a percentage of it or a fixed amount to their self-directed retirement account. This method, because automatic transfers may be set up, is a simple and easy-to-remember option for funding your SDIRA.

One way to look at it is to consider it a monthly IRA payment as you would a bill or subscription service for the future. How much would a new music platform, streaming, food box, or other subscription cost? In this case, when investors choose to divert that money (for a monthly contribution) toward their retirement, they can add to a Bitcoin IRA account every month in place of an additional subscription.

One great way users may save some extra coin is to participate in a round-up program. Numerous banking institutions and apps offer round-up programs, in which the final balance of debit card purchases is “rounded-up” to the nearest dollar, and the spare change is moved to a savings account. Investors can then choose to take that extra money and put it towards retirement.

Investors may also consider asking family members for IRA contribution gifts as birthday, wedding or anniversary presents.

Understanding Contribution Limits

The IRS has placed limits on how much investors can add to an IRA account each year. To learn more about this, it’s best to consult with a tax advisor about this year’s contribution limits.

It’s important to note that these limits change regularly, and an investor’s age plus taxable income may be considered.

How to Buy Bitcoin in an IRA Account

Bitcoin IRA simplifies the process of investing in crypto within a self-directed IRA, essentially creating a seamless experience for users to buy Bitcoin and other cryptocurrencies with their Bitcoin IRA account once it’s been funded. The easy-to-use platform is equipped with many useful features, such as an online dashboard, custom price alerts and more! Plus, unlike the market for traditional investment assets, users can buy, swap or sell crypto on the Bitcoin IRA platform 24/7.

When a user chooses to invest in crypto through a self-directed IRA, all investment decisions are 100% owned by that user. Investors, thus, have the power to devise their own winning strategy and stick to it. Bitcoin IRA offers users more than 60 types of cryptocurrencies to choose from, which may aid in portfolio diversification.

No matter what, Bitcoin IRA* has your cryptocurrency investing needs covered.

*Alternative IRA Services, LLC dba Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. Self-directed purchases processed through Bitcoin IRA have not been endorsed by the IRS or any government or regulatory agency. Bitcoin IRA is not an adviser. Information contained on this website is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you. Cryptocurrencies are very speculative and involve a high degree of risk. By using the website, you understand the information being presented is provided for informational purposes only and agree to comply with our Terms of Use and Privacy Policy.

Recommended articles: Guide to Cryptocurrencies in a Roth IRA

Crypto Investing Myths Debunked

Once investors decide to diversify their retirement portfolios by investing in cryptocurrency, the next step is to determine the best way to fund this new retirement endeavor.

A self-directed IRA (SDIRA) is a viable option for investors to consider and they can get started by either opening a new account or converting an existing retirement account.

What is a Self-Directed IRA?

A self-directed IRA varies from a traditional IRA in that investors have more flexibility in the types of investments they choose to make. With an SDIRA, you have the choice to fund it with non-traditional assets, like crypto, through a custodian or broker. Since cryptocurrency investing is not yet considered a “traditional” investment method, investors may choose to open a self-directed IRA to invest in cryptocurrencies. Meanwhile, it’s important to note that investment advice is no something provided by the self-directed custodian.

Non-traditional investment vehicles—including crypto, real estate, private equity and gold—offer investors ways to diversify their portfolios away from traditional assets, like stocks and bonds. While a bit more exciting, these investment options may be highly volatile and also come with their own set of risks and rules.

The risks include how investors understand self-directed IRAs, in addition to the account holder’s expertise in what and how they choose to invest their funds. The rules are too numerous to list here, but many can nullify the account’s tax-advantaged status. For example, if the IRS finds out you painted a wall in an apartment building owned by your IRA rather than hiring someone, you may have likely engaged in a prohibited transaction.

Investors may also want to avoid the risks of early withdrawals that come with cryptocurrency investing; despite how tempting it may seem to cash out early after seeing profits.

How to Convert Your Retirement Account to Invest in Cryptocurrency

For investors ready to convert existing IRAs, the first step is to find a qualified custodian, like Bitcoin IRA that offers the investing products they seek for investing in cryptocurrency. Next, identify the type of retirement account you have or the one you would like to open.

The primary differentiator between account types is how they are taxed. Investors have the option to choose between a Roth or traditional IRA. The funds deposited into a Roth IRA are taxed before they enter the account, while the funds in a traditional IRA are taxed upon withdrawal.

Investors can choose to utilize either type of IRA. Furthermore, investors who decide on a self-directed Roth IRA should be aware that they may be required to pay taxes if the funds are converted from a traditional IRA. It is wise to consult with a tax professional before converting funds to a new account type.

After contacting the new retirement account custodian with your information to start the conversion process, the account should be ready for you to fund it and to begin investing in cryptocurrency.

Find a Cryptocurrency-Friendly Retirement Account  

To safely invest in crypto with your self-directed IRA, look for a platform based in the United States that offers custody insurance¹ and cutting-edge security². Bitcoin IRA* provides customers in all 50 states with more than 60 cryptocurrency investing choices through easy-to-use mobile and web-based platforms.

It’s the world’s first and most trusted crypto IRA platform that offers 24/7 trading and allows users to buy, sell and swap their cryptocurrencies with their self-directed retirement accounts. Visit BitcoinIRA for more information today.

²Security may vary based on asset chosen and custody solution available.

*Alternative IRA Services, LLC dba Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. Self-directed purchases processed through Bitcoin IRA have not been endorsed by the IRS or any government or regulatory agency. Bitcoin IRA is not an adviser. Information contained on this website is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you. Cryptocurrencies are very speculative and involve a high degree of risk. By using the website, you understand the information being presented is provided for informational purposes only and agree to comply with our Terms of Use and Privacy Policy.

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Guide to Cryptocurrencies in a Roth IRA