Bitcoin IRAs Enable Tax-Shielded Investment And Propel The Circular Economy

In May 2021, I had just finished a pretty intense 12 months of helping take OC Bitcoin Network from a monthly meetup to a weekly meetup. In addition to the meetup work, over that same 12 months I independently consulted with over two dozen small businesses on how they could begin to implement Bitcoin payments and personally installed BTCPay Server at four brick-and-mortar restaurants as well as multiple e-commerce businesses.

All of 2020 felt like a real grassroots war to me. It made me open my eyes to the fact that the circular economy is at hand. It made me realize that Bitcoin isn’t a thing that’s happening in the future. Bitcoin is a thing that’s happening right now.

When the opportunity to come work at Choice App, a bitcoin-based individual retirement account (IRA) service, presented itself, I was obviously excited because I like talking about all kinds of Bitcoin products and my wife was thrilled too for us to get back to dual-income stacking after she had led the charge for a full year. But, I have to be honest, there was a small voice in my head telling me that I was selling out and going corporate, which caused me to think about a lot of things. It caused me to think a lot about what our path is to making bitcoin circulate as the currency in our lifetime and it caused me to open up the tactics that I had been focusing on.

Bitcoin fixes retirement accounts. This is obviously positive, but on its face can also be met with resistance and questions such as “why do I need an IRA if I have bitcoin?”

I asked myself that same question. The concepts of IRAs and retirement accounts in general feels like a vestige of the old world. To young people or old people who watched 2008 happen and who read the Bitcoin genesis block, the words do not leave a good taste.

The whole concept of a retirement account doesn’t make any sense when fiat is the base layer. This realization made me stop contributing to one a long time ago in favor of stacking bitcoin instead.

And I know from talking to lots of other Bitcoiners that some had gone this route as well, while others had taken the time to set up self-directed IRA accounts and were beginning to blur the two worlds. I didn’t hate that idea but I was just having a hard time wrapping my head around where that type of account fits into my bitcoin stacking plan.

Bitcoin Retirement Accounts, Capital Gains Taxes And Tying Both Worlds Together

To this day, talking about onboarding businesses to BTCPay Server and about using bitcoin as money is still a hard thing to work on. It’s work that you do for the love of the game and not for the paycheck. It’s work that you do for your kids and grandkids, who will hopefully live in a world where the Bitcoin circular economy has won and has become the standard.

Even with the advancement of Strike and the clever tool it has built, the “what about cap gains?” replies still come fast and furious on Twitter anytime the topic of circular economy is discussed.

The persistent capital gains tax problem and the IRS’s treatment of bitcoin as property instead of currency is a major hurdle between us and the Bitcoin standard.

The more I thought about the capital gains tax’s chilling factor on the circular economy, it made me start to see an overlap between what I had been doing with bitcoin payments consulting and my new role talking about Choice App.

Starting to see the overlap, I started to reinterview the Bitcoiners I knew who had been stacking bitcoin in their Roth IRAs and asking them more about it.

Certain self-directed IRAs come with what is called “checkbook control.” This means that you have a bank account and you have a checkbook and that outside of two to three prohibited transactions, you can literally invest the money in whatever you want and hold that investment and trade in and out of that investment, tax free.

Take this idea and now apply it to an IRA in which you set up an LLC or trust and then with that LLC or trust you purchase bitcoin and hold your own keys and have control over bitcoin in your own wallet. You now have bitcoin wallet control and, outside of those same two to three prohibited transactions, you’re now tax-shielded to use that bitcoin as money to make investments.

This is how the worlds collide. This is how you can begin to use bitcoin as your base currency now, in the present. and continue shifting yourself toward a personal Bitcoin standard.

Why Mining Bitcoin In An IRA Is Doubly Interesting

Among many, one of the things that’s most interesting to me about Bitcoin mining is that the revenue is denominated in sats. There are not many ways to get paid in sats available yet, but mining is one of them, and we know that getting paid in a currency is the number one way to start thinking in that currency.

When all of the mining infrastructure and hosting is wrapped in a tax-advantaged account, you can use bitcoin as the base currency on the income side as well as the expenses side with no penalties. The simple mindset shift on this will be enough to make this a good move for a lot of people. Seeing this type of budgeting in action will make your brain progress toward a personal Bitcoin standard.

Roth IRAs As Your Third Bitcoin Stack

Having bitcoin in a Roth IRA creates a guarantee that those sats can circulate as unencumbered currency in our lifetime. We have no idea what the future holds, but the landscape of Bitcoin apps and services is getting better every single day.

Imagine where BTCPay Server will be when a lot of us turn 59-and-a-half years old. Imagine, no matter what the political landscape throws at us, having a third stack to be able to use in the circular economy. (I have bitcoin from regular exchanges like Coinbase and Cash App as the way I started stacking bitcoin; and then I also stack bitcoin by earning it, mining it at home and from Bisq and ATMs; my Roth IRA stack is my third.)

My Roth IRA stack doesn’t replace anything that I’ve been doing, but it perfectly compliments it and it perfectly compliments the other ways that the Bitcoin standard is being pushed forward by showing that Bitcoin is taking ground in retirement accounts while also achieving circular economy goals.

There is a long, winding road filled with what I would consider “semi-advanced Bitcoin game theory” to get there, but I can honestly say I’ve never been more excited for the state of the Bitcoin circular economy. I can see clearly different stacks of bitcoin for different things and I can feel my budget and my family’s budget beginning to get denominated in sats.

This is a guest post by Brian Harrington. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


Tagged : / / / / /

Crypto Firms Partner To Create Tax-Free Bitcoin Mining IRAs

Two crypto firms are partnering on a product that they say will allow Bitcoin (BTC) miners to deposit tax-free BTC into an individual retirement account (IRA).

The Bitcoin mining marketplace Compass Mining says its miners can now use accounts from IRA provider Choice to avoid income taxes on their mining revenue in the short term or indefinitely, depending on the type of IRA they utilize.



The product will help to reduce the often-substantial tax burden crypto miners face in the United States, according to Compass.

“Cryptocurrency mining revenue is currently taxed as income, requiring Compass miners to pay income taxes on the bitcoin they mine. Miners are also sometimes forced to sell a portion of their mining revenue for dollars to cover their tax bills, which creates an additional taxable event, requiring miners to pay capital gains taxes…

Tax-efficient mining presents enormous benefits to retail miners and empowers them with another tool to mine even more profitably at a smaller scale.”

According to Compass, miners will need to purchase mining hardware with Choice funds in order to use the IRA. After that hardware comes online, mining payouts will be sent to a miner’s Choice account.

Choice CEO Ryan Radloff suggests that the product will help Bitcoin miners plan for the future.

“We’re always looking to find solutions for customers who are trying to save more of their hard-earned money and plan for their future. Being able to purchase a Compass miner within your IRA and mine bitcoin in a tax-advantaged account is an incredible opportunity.”

Don’t Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox

Follow us on Twitter, Facebook and Telegram

Surf The Daily Hodl Mix




Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Shutterstock/KoKiChs


Tagged : / / / /

Why The $35 Trillion In United States Retirement Accounts Should Be Spent On Bitcoin

“Many adults are struggling to save for retirement and feel that they are not on track with their savings. While preparedness for retirement increases with age, concerns about inadequate savings are still common for those near retirement age.” —Federal Reserve Website

Despite the Federal Reserve’s tone-deaf admission that many Americans struggle to retire when one of the central bank’s primary mandates is price stability, as of March 2021, there were approximately $35.4 trillion trapped in tax-advantaged retirement accounts. For many Americans, retirement accounts make up a vast majority of their overall net worth.

As the dollar continues to inflate and bitcoin continues to outperform any other form of savings, it’s natural that Americans will increasingly tap into their retirement savings to gain exposure to bitcoin. This is great news for bitcoin, but many risks emerge if these funds ultimately centralize in a few custodians’ hands.

Contrary to what many Americans might expect, anyone can hold the private keys to their bitcoin IRA instead of relying on a third party. However, navigating the US retirement rules and regulations can be difficult. This article can be used as a high-level starting point but nothing in this article should be taken as financial advice.


How U.S. Retirement Accounts Work

Retirement accounts (such as IRAs, 401(k)s, 403(b)s, 457 plans and others) allow contributions in the form of traditional funds, Roth funds or a mixture of both.

  • Traditional retirement account: Contributions receive an up-front tax deduction or exclusion from taxable income. Those traditional funds can be withdrawn after age 59.5 without penalty, but they will still be taxed upon withdrawal at ordinary income tax rates.
  • Roth retirement account: Contributions receive no up-front tax benefit. However, after age 59.5, all Roth funds — including all appreciation — may be withdrawn completely tax-free.

In either a traditional or Roth account, all capital gains and other investment income are free of tax as the assets grow.

Bitcoin: The Retirement Inflation Hedge

Historically, the 5 to 8% annual yield delivered by typical retirement accounts may have surpassed the real inflation rate of the dollar. Regardless, it definitely beat the official government-reported inflation rate. In 2021, however, there is no serious argument that such a yield is outpacing inflation.

Fortunately, today we have bitcoin, a revolution in savings technology with average yields over 100% per year when measured in U.S. dollar terms (past performance is no guarantee of future results). With its strict supply limit, bitcoin is an attractive savings vehicle for funds not intended to be touched for a few decades.

Unfortunately, marrying this new savings technology with traditional savings vehicles such as retirement accounts typically require significant trade-offs. Legacy retirement accounts, at best, might offer investments in the Grayscale Bitcoin Trust (GBTC) or stock in companies that hold large bitcoin reserves such as MicroStrategy (MSTR). But either of those options requires trusting the relevant institutions to actually hold all of the bitcoin they claim to hold (don’t trust, verify). And none of those investments grant savers access to any keys, putting the institutions in total control of your retirement’s destiny.

Enter The Self-Directed Checkbook IRA

Fortunately, a growing number of companies can help you use your retirement funds to buy bitcoin and hold the keys yourself. A self-custodied Bitcoin IRA combines the best of bitcoin self-sovereignty with retirement tax optimization.

Instead of leaving a large portion of your wealth invested in assets that are barely keeping up with inflation in a legacy IRA or 401(k), you can introduce bitcoin, the strongest currency that the world has ever seen, into your retirement portfolio by using just a couple of hardware wallets and completing some legal paperwork.

How Does A Bitcoin IRA Work?

The best bitcoin IRAs use a structure known as a self-directed checkbook IRA. This is an IRA that provides you with total control over your retirement assets. Unlike the first generation of self-directed IRAs, self-directed checkbook IRAs allow the underlying assets to be custodied by you instead of an IRA custodian.

Structurally speaking, in a self-directed checkbook IRA, your IRA owns one singular asset: an investment trust entity. That investment trust owns your underlying investment assets (in our case, bitcoin). Despite the investment trust being owned by your IRA rather than by you directly, you are sole named trustee. This means that you and only you are in charge of investment selection and custody.

Here are the five basic steps to convert a portion of your retirement to bitcoin and hold your own keys:

  1. Set up an investment trust (the most common checkbook entity used today, although in the past sometimes LLCs were used instead).
  2. Set up a custodial IRA account with a licensed IRA custodian that accepts checkbook-style investments.
  3. Rollover (transfer) your legacy retirement account into the new IRA account and direct the IRA custodian to invest into your investment trust, which means they move your retirement funds into your trust’s checking account.
  4. Onboard your investment trust with an exchange, linking the investment trust’s checking account.
  5. Purchase bitcoin and secure it in cold storage with your private keys.

Common Questions About Self-Directed IRAs

Why not just liquidate the old retirement account to buy bitcoin?

Early withdrawals from retirement accounts come with taxes and steep penalties, sometimes up to 40%. Getting 40% more bitcoin today is significantly better than taking the tax hit. You’d also miss out on the tax benefits of holding bitcoin in a retirement vehicle.

Isn’t a retirement account antithetical to bitcoin?

Purchasing bitcoin in a retirement account while holding your own keys combines the sovereignty, permissionlessness, and savings power of Bitcoin with the lesser-known opportunities available in the legacy financial system. Even though your licensed IRA custodian technically holds the IRA, you hold the private keys to the bitcoin addresses. Not your keys, not your bitcoin.

Why not just wait for an ETF?

An ETF will not allow you to hold the private keys to your retirement. A centralized custodian will still hold your bitcoin. An ETF will be far less secure from remote hacks or custodial hacks and significantly more prone to confiscation. Further, future Bitcoin ETFs will most likely function as bitcoin derivatives lacking the safety of real bitcoin. It’s also worth noting that we’ve all been waiting for a bitcoin ETF since 2015, to no avail.

What’s the best way to do this?

The company I work for, Unchained Capital, has published a comprehensive guide with the KeyKeeper IRA team. Out of the available options for self-custodied IRAs, I’m confident we have the smoothest and fastest process to get a portion of your retirement accounts rolled over and bitcoin delivered to your cold storage.

However, there are other options for bitcoin IRAs out there. Here are four things to consider when investigating:

  1. Can you hold the keys to your retirement account’s bitcoin?
  2. What is the fee to purchase bitcoin and are there limitations to where you can buy it? Marking up bitcoin purchases is how many of these companies make their money.
  3. What is the annual fee for the accounts and is there a charge based on assets under management? You don’t want your retirement accounts to get more expensive as the value of bitcoin increases.
  4. What is the timeline from start to finish? It can be painful for your retirement funds to be out of the bitcoin market for extended periods if you try to exit GBTC.

What about privacy?

As with any IRA, the year-end value of a bitcoin IRA must be reported to the IRS annually. It is important to note that this disclosure is only of the U.S. dollar value of the holdings, not of any bitcoin addresses or other data. Regardless of whether you secure your bitcoin in collaborative custody with a provider like Unchained Capital, in your own multisig setup or with a single hardware wallet in a drawer, the reporting obligation remains the same. With this in mind, eliminating single points of failure with a collaborative custody vault has very little downside.

The annual reporting requirements are a trade-off when considering whether to set up a bitcoin IRA. But if you have existing retirement accounts that you want to rollover into bitcoin, the alternative is making an early withdrawal and paying the penalty, making the one-time privacy trade-off when purchasing bitcoin from an exchange, and ending up with up to 40% less bitcoin as a result.


U.S. retirement accounts are currently sitting on the melting ice cube of the devaluing dollar. Moving retirement assets into bitcoin opens up the opportunity to convert some of the $35.4 trillion stuck in these accounts to bitcoin secured by millions of private keys distributed among millions of Americans. This is the greatest untapped source of American “dry powder” that can flow into Bitcoin. Still, this transfer must be undertaken intelligently while educating savers about the benefits of holding private keys.

Controlling the private keys to your retirement is a large responsibility. But holding your private keys is the only reliable way to protect Bitcoin savings from hacks, inside jobs, central bank debasement, haircuts and confiscations. The process is consistently getting easier. Due to the superior security that comes with holding private keys, we believe over a billion people will hold the keys to their wealth within the next few decades.

Not your keys, not your retirement.

This is a guest post by Phil Geiger. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


Tagged : / / / / / /

Compass Mining To Offer U.S. Clients Tax-Efficient Bitcoin Mining

U.S. Clients of Compass mining can now mine bitcoin directly into a Choice Individual Retirement Account without triggering a taxable event.

U.S. Clients of Compass mining can now mine bitcoin directly into a Choice Individual Retirement Account without triggering a taxable event, per a press release sent to Bitcoin Magazine.

Under the current tax laws, revenue from Bitcoin mining is taxed as income. Currently, miners must also pay capital gains taxes when they are forced to sell some of their bitcoin to cover other tax obligations.

Through mining in a Choice account, miners avoid taxes on their bitcoin revenue in the short term and potentially indefinitely, depending on which type of IRA they use.

In the statement sent to Bitcoin Magazine, Compass explained: “tax-efficient mining presents enormous benefits to retail miners and empowers them with another tool to mine even more profitably at a smaller scale.”

Choice is an independent, qualified custodian regulated by the South Dakota Division of Banking and an offering of Kingdom Trust Company. In May of 2020 Choice became the first retirement provider to offer a single account for all client retirement assets, physical or digital, legacy or traditional. The Choice platform currently hosts over 125,000 retirement accounts, with over $18 billion assets under custody.

Compass mining allows users to effectively mine without worrying about the logistics of mining through purchasing and renting machines that are then housed, maintained, and operated on the client’s behalf. It is the fastest growing marketplace for average investors to mine profitably at a wide range of scales. Retail miners are provided access to the same high-quality mining hardware and verified hosting facilities as large scale industrial competitors.

In July, Compass Mining reached over 450 petahash (PH) of hashrate across all its mining customers. The tax benefits of mining to a Choice IRA account are limited to retail miners who have purchased hardware through Compass. The mining payouts are then sent directly to the Choice account.

Ryan Radloff, CEO of Choice commented, “Being able to purchase a Compass miner within your IRA and mine bitcoin in a tax-advantaged account is an incredible opportunity. Our entire team is excited to work with Compass and as the industry continues to evolve.”


Tagged : / / / / / / /
Bitcoin (BTC) $ 26,577.12 1.64%
Ethereum (ETH) $ 1,617.18 2.03%
Litecoin (LTC) $ 64.39 0.65%
Bitcoin Cash (BCH) $ 232.33 9.15%