facebook How to Benefit from a Digital Self Directed IRA - Escape Artist

How to Benefit from a Digital Self Directed IRA

In this article, I consider the benefits of setting up a digital self directed IRA. This structure is used to invest in digital assets, such as cryptocurrencies, bitcoin, and ICOs. These investments can be in the United States or abroad. There are many benefits that come with combining your Digital currency portfolio with your Self Directed IRA into a digital self directed IRA.

The IRS recently issued a statement that confirmed digital currencies as personal property for taxation purposes making them eligible assets that can be held within a self directed IRA. This means that anyone with digital currency can store their Bitcoins (or any type of virtual currency) in their retirement account, thereby creating a digital self directed IRA.

Based on the decree by the IRS that digital currency is to be considered as a personal property, it is also eligible to be held as tax deferred in your IRA and does not generate Unrelated Business Income Tax in the account. This status allows the digital currency stored in your SD IRA account to grow in value without any immediate tax liability.

For more on UBIT, see: What is UBIT in an IRA?

We can simplify this by saying that in a self directed IRA, or any type of IRA, digital assets work exactly like gold would. The worth of the actual asset is its worth in the market, but there is no tax charge if there is an increase in the value of gold or the cryptocurrency.

Any money that you might obtain from the sale and purchase of digital currencies associated with your account will flow from your crypto wallet into your IRA. It can reinvested into any other retirement assets the you might have, just as the income from the sale of gold in your account would be. The assets that are reinvested this way will remain tax free until they are taken out of the account and distributed.

Note: I use the term tax free throughout this article on digital IRAs. Technically, gains in a traditional IRA are tax deferred because you pay tax when you take your distributions. Gains in a ROTH are tax free because you put after tax money rather than pre-tax money into the account.

Let me get back to the benefits of setting up a digital self directed IRA.

One of the most popular digital currencies in circulation right now is Bitcoin. Even though Bitcoin has been experiencing a period of volatility, it is still a popular coin to store in a Self Directed IRA.

Investing in Bitcoin with Self Directed IRAs can be a very efficient tool if you wish to continue managing your wallet on your own terms. A custodian will always be on hand to take care of your assets, but you can continue to trade your cryptos in your IRA wallet.

The major benefit of using a digital IRA rather than your savings is that your gains are tax free. When you trade cryptos, all gains must be reported and are taxable. Even when you sell Bitcoin and buy Ethereum (for example), you have a taxable gain. All of this cost and complexity is eliminated when you by cryptos in a digital IRA.

Another way in which investing in Bitcoin can be helpful is by diversifying your portfolio. Some are looking to cryptos as a hedge against FIAT while others attribute a “high yield” portion of their accounts to crypto.

Experience the Insider community that takes your international lifestyle to the next level. Download your FREE guide

"18 Steps to Implementing Your Plan B" instantly!

Many clients who maintain alternative assets in their savings usually don’t rely on them for trade and purchase, but virtual currencies are different. Cryptos are all about trading and moving in and out of coins quickly. This makes your IRA assets more flexible and non traditional which many clients love.

For anther top alternative investment, consider teak. If you structure this one properly, you can get residency in Panama along with your investment. See: Here’s How to get Residency in Panama Using Your IRA.

It is important, especially in this times, to diversify your portfolio to include other forms of assets. Stocks, gold, and mutual funds are not the powerhouses that they used to be. Digital assets are replacing them in digital IRAs throughout the United States and offshore.

Blockchain technology has many benefits and combining the power and potential of blockchain with your Self Directed IRA account is going to be huge in the future. Many companies are already starting to partner with blockchain as they see its potential.

Even some IRA custodians and providers are moving to the blockchain. Its peer to peer network means that every movement in your SD IRA can be accounted for. See: Best Foreign Investments for a Self Directed IRA

We have only mentioned Bitcoin but there is a lot of cryptocurrencies to choose from. Ethereum has been going strong in the past few days, but many experts consider Ripple to be the cryptocurrency of the future. All of this digital currencies can be bought, sold, and traded to your IRA without tax or reporting requirements.

I hope you’ve found this article on  Digital Self Directed IRAs to be helpful. For more information, or for assistance forming an offshore IRA LLC or connecting with a qualified custodian, please contact us HERE.


EA Store

Like Our Articles?

Then make sure to check out our Bookstore... we have titles packed full of premium offshore intel. Instant Download - Print off for your private library before the government demands we take these down!