The fact that it is now possible to start a Bitcoin IRA is no longer a secret. However, the fact that people know they can start an IRA with cryptocurrencies doesn’t mean that they know how to do it the way they should. In fact, there are numerous ways to do this and it is important to investigate all of them so that you don’t get taken advantage of. Let’s take a closer look.
Can You Really Start a Bitcoin IRA Under IRS Rules?
Many people still think that the only things you can put in an IRA are Wall Street assets, such as stocks and bonds. However, this isn’t true. Rather than allowing certain asset classes, the IRS only prohibits some of them explicitly. And the only ones they prohibit are collectables and life insurance. Cryptocurrencies are neither of those, which means that you can indeed invest in them. However, the fact that it isn’t prohibited also doesn’t mean it is endorsed. This is why it is so easy to fall into the trap of clever marketing, with companies stating they have explicit IRS approval. That is never true.
How to Start a Bitcoin IRA
Now that you have some idea of what is and isn’t allowed, it is time to open your Bitcoin IRA. Thankfully, there are just three things that you need to do:
Make sure you choose the IRA that is right for you
If you already have an IRA, it is likely that they will not help you purchase bitcoin, regardless of the fact that they are allowed. The reason for this is because most IRA companies used “captive accounts”, which means that you can only add those assets they know and are comfortable with. If you have a self-directed IRA, however, then you are not limited by the investments of your IRA company at all.
Set up a Bitcoin wallet
This is an online wallet in which your cryptocurrencies will be stored. It is basically a digital safe deposit box in which everything you need in order to purchase and store your cryptocurrencies is stored. There are lots of different wallets available, so do make sure you understand the difference between them and choose the one that offers you the greatest security. Bitcoin transactions are non-reversible and anonymous, which means that if your wallet is hacked and cleaned out, there is no way of getting things back.
Fund your Bitcoin wallet but make sure you do so with funds that are already in your IRA. If you don’t do this, you will incur some significant IRS penalties. In fact, most people prefer setting up an LLC that owns the Bitcoin wallet just to make sure everything is done right. There is no flexibility at all on this issue according to the IRS and getting it wrong means you lose all your tax advantages as well.
Hopefully, with these three pointers, you will be able to invest in cryptocurrencies – the right way!
Article Submitted By Community Writer