For years, the IRS has removed a chunk of crypto miners income from all American taxpayers. But one company is now attempting to help crypto miners guard their mining profits from federal taxes by allowing them to do business within an IRA.
Usually, when a person mines for digital coins, proceeds are said to be income by the federal government, and therefore, must be counted in your taxable income.
“American crypto miners have double taxation,” says Ryan Radloff, who is the CEO of IRA custodian Kingdom Trust, which is offering the Choice IRA. Choice specifically focuses on savers looking to include crypto assets to their portfolios.
Mining Inside An IRA
Radloff partnered with data-center company Compass Mining this week to give clients an account that will allow them to mine for crypto directly inside their IRAs.
The process is very simple.
A customer first buys mining hardware by using the money within their IRA. Radloff says the equipment can range from $5,000 up to over $10,000. Compass handles the details and logistics, from delivering the machines to the data center, to setting up and monitoring the equipment.
While the Compass miners generate mostly bitcoin, they also provide some litecoin and zcash mining machines.
“After the miner is inside the IRA, the new bitcoins are seen as rental income or as dividends from stocks that you hold within your IRA – meaning they do not count as a contribution to your IRA,” says Radloff.
Radloff reports that if clients decide to sell, the capital gains taxes will either be deferred or eliminated if done inside the IRA.
“You are not getting access to the rental cash flow, it just goes right into the IRA,” explained Shehan Chandrasekera, the tax strategy leader at CoinTracker.io, a digital currency tax software firm that helps its customers track their cryptos across virtual wallets and manage their taxes.
While Bitcoin’s short-term volatility is more than enough to make anyone shy away, its increases over the long term, when combined with the inflation and uncertainty of the U.S. dollar, might make it a prime investment asset if such retirement offerings become recognized and accepted by the IRS.
Author: Blake Ambrose
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