Mark Kohler breaks down the three-part tax structure crypto earners use: a personal trust for estate planning, an LLC taxed as an S-corp to deduct business expenses and fund a 401(k), and retirement accounts like Roth IRAs to grow earnings tax-free. Routing crypto income through an S-corp can dramatically lower your effective tax rate.
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Remember the trifecta. Three pieces. You've got your trust down here and your 1040 tax return. And over here you've got your LLC and you're buying rental properties. Or you have crypto over here and you're trading. Oh, and you've got your IRA, remember your Roth, your 401k, that's over here and you're going to be doing trading over here. What's the other part of the trifecta? Your operations. So for those of you that have operations in crypto, that's what I'm talking about. We want to set you up as an LLC and more than likely you're going to get taxed as an S corp and all of that mining and different types of staking and earning in crypto, NFT creation, digital assets, Metaverse, all of these little activities where you're making money. With crypto, you're not trading. We're not talking about trading. You're earning crypto. When you earn cryptocurrency, it's subject to self employment tax, 15.3% right off the top, then Fed, then State, you want to add that up, that could be as high as 50%. You're going to pay in taxes. Now, if I can funnel it through an S corp, set up a W2, we're going to fund your 401k, we're going to take write offs for home, office and auto and travel and electronics and computers and laptops and cameras and all these goodies. Now you're taking tax write offs against the crypto you're earning.
