Mark Kohler explains how to shelter crypto gains from taxes using Roth IRAs and Solo 401(k)s. He walks through a $10,000 investment growing to $100,000 and shows the tax savings from holding crypto in these accounts instead of taxable ones.
If I just buy and hold, never sell bitcoin. Why do I need a tax shelter such as an IRA or Solo 401k? Because someday you are going to sell. You are going to pay tax someday. I'm not saying what you're doing is bad. I'm not saying it's great. I'm saying it's good. But I want to take it to great. Let's say Jim today buys $10,000 worth of Bitcoin in his individual name. And he's like, mark, I'm going to sit and hold. I'm going to just buy and hold. All right, let's play it out. This is option one. He sits on it 10 years. Some people think Bitcoin will 10x in the next 10 years. All right, cool. In 10 years, it's worth 100 gr grand. If the tax rates are the same, you're going to pay approximately 23.8% federal plus state. Wherever you live, when you sell, there's only nine states that are tax free. Let's say you're in an average state at 8%. I'll go seven. It's 23 plus seven. You're going to pay 30% in taxes. You're going to pay $30,000 in taxes. You get 70 grand. Okay, that's good. How about we go next level? Do it at the same time. Split both strategies up. Option two, open up a Roth IRA this year. You can put 7,000 or 8,000 in based on your age. In another six months, you can put another seven grand in. So let's say you get your $10,000 in there. Now it's in your Roth IRA. It's not you, it's your Roth. Two different investors. You wait your 10 years, it's worth 100 grand, zero tax. That's why Jim, do both. Don't stop doing what you're doing. Just add another feature. How would it be to have an ATM that's tax free 10 years from now? At age 59 and a half, you can pull it out tax free.
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