Mark Kohler outlines a tax strategy for crypto traders using a "trifecta": a day job, a side business, and a revocable trust to funnel profits into Roth IRAs and 401(k)s. You can contribute up to $70,000 yearly into these accounts, and once the money is inside, future crypto trades generate no tax liability.
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If you're so worried about taxes, don't even generate taxable income to begin with, then I don't have to figure out how to get rid of the tax. Now, some of you are like, well, Mark, I already have 500 grand in crypto. How am I supposed to get it over to my Roth ira? One principle I teach is called the trifecta. In this example, you might have ordinary income and passive income. And down here is your revocable living trust. So you might have a day job, you might have a side Hustle llc, you might have an S corp. But we're over here trading crypto. And what you're doing is you're generating a taxable transaction tax, taxable income every time you trade. And if you say, oh, Mark, I never took the money, I just kept it in my wallet, I just traded Bitcoin for Solana or whatever, that's taxable. So if you're going to pay tax every time you trade, let's start building the Roth. So if I can take some of this money I've been generating over here and contribute it to my Roth or to my business, that drops it into my Roth and we add this little 401k piece to it this year, you can put over 70 grand into a backdoor Roth IRA or more, depending on your age. So what we want to do is start contributing, contributing or transferring money into our Roth machine. And these contributions and transfers are not taxable. You're going to pay tax on your money as you make it, but then we're going to contribute the money to this Roth. Now, when you go out and trade and you're doing all of your crypto transactions, there's no tax.
