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What is a Bitcoin IRA?

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A Bitcoin IRA or Digital Currency IRA is an Individual Retirement Account in which Bitcoin or other approved digital currencies are held in custody for the benefit of the IRA account owner. It functions the same as a regular IRA, only instead of holding paper assets, it holds the popular digital currency, bitcoin, in custodian managed wallets. Bitcoin IRAs are usually self-directedIRAs, a type of IRA where the custodian allows more diverse investments to be held in the account.

The Bitcoin IRA model is similar to Gold, which is one of the more popular self-directed IRAs and can include other types of retirement accounts such as, Roth IRAs, SEP IRA, SIMPLE IRA, HSA, Thrift Savings Plan (TSP), and 401(k)s.

Investors often use bitcoin as a long-term hedge against inflation, to diversify their portfolio. Internal Revenue Code requirements state that the bitcoin must be stored in a specific manner.

Bitcoin IRA, bills themselves as America’s #1 Bitcoin IRA Provider and they manged to meet the IRS requirements by partnering with BitGo and Kingdom Trust. BitGo is the industry leader in multi-sig security, full custody and multi-user access controls and Kingdom Trust offers Self-Directed IRA solutions for individual investors, investment sponsors, family offices, advisory firms and broker-dealers.

Bitcoin IRA provides a Free Bitcoin Investor Kit for United States residents.

bitcoin-wallet-architecture-comparison

Investopedia offers the below information about IRA’s and Digital Currency Tax Implications.

IRA Rules

A couple of major changes have hit the retirement planning community in the past year. One of them is the restriction on individual retirement account (IRA) rollovers where the employee receives a check from the previous IRA or retirement plan custodian. This can now only be done once per year, and any additional rollovers effected within that year where the taxpayer receives a check will be automatically counted as distributions. This can be easily avoided in most cases through the election of direct transfers or rollovers (and most tax and financial advisers agree that this form of transference is by far the most sensible and convenient in any case for many reasons).

The other issue pertains to IRAs that are inherited. A recent Supreme Court decision has ruled that money received by heirs in these accounts are no longer considered retirement assets. This effectively means that creditors can now get their hands on that money if you go bankrupt or become otherwise unable to pay a debt.

Digital Currency

Although this form of currency is still in its infancy, bitcoins and other forms of digital currency will likely become mainstream forms of exchange at some point in the future. But at this point, the IRS classifies this form of currency as property rather than legal tender. However, recipients of this form of payment are still required to pay income and withholding taxes on their digital earnings. Employers are likewise required to list this form of payment on 1099 and W2 forms. Digital currency owners are also required to report gains and losses from purchases and sales of this currency on Schedule D.

Speak with a Bitcoin IRA Specialist to see how you can take advantage of a Bitcoin IRA.

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