Is it Possible to Own Bitcoin in a Self-Directed IRA?

Is it Possible to Own Bitcoin in a Self-Directed IRA?

The price of Bitcoin is volatile, so it is only natural that investors get intrigued when they see a spike. After all, investors with a Self-Directed IRA are often interested in asset classes that function outside of the typical “stock market” system. One such asset is Bitcoin. This cryptocurrency has been making waves for years. It is an independent cryptocurrency that is not backed by anything, but also is not tied to anything, which makes it both a risky prospect for ownership and an intriguing possibility to consider as an asset class.

There is one thing that Self-Directed IRA investors need to know first: is it possible to own Bitcoin in a retirement account? Here is what you should consider.

Using a Self-Directed IRA for Cryptocurrencies

Using a typical IRA means that the investment firm through which you hold the IRA likely does not offer the ability to purchase Bitcoin or other cryptocurrencies. Doing so would require a Self-Directed IRA. As one article notes at Forbes: “The operative question isn’t whether it’s legal for an IRA to own Bitcoins, but whether it’s prohibited. Under the tax code, certain assets and activities are strictly prohibited, and running afoul of those prohibitions can be very painful indeed.”

In 2014, the IRS clarified the role of Bitcoin for tax purposes, essentially treating it as private property. This means that an investment in Bitcoin is taxable when sold—just as an investor would owe money on income generated from a different type of investment property. Says the IRS: “A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.”

Because cryptocurrency is not a prohibited collectible, and the IRS strictly prohibits only a limited type of asset classes in Self-Directed IRAs, investors have a lot of freedom when using a Self-Directed IRA.

The Practicality of Owning Bitcoin within a Self-Directed IRA

You might have noticed that in a traditional retirement account—such as one you might have through your employer—there really are not any options for doing something as bold as trading in Bitcoin. This is because you need to initiate a self-directed account. The same is true if you wished to invest in real estate, for example, within an IRA. The rules of retirement accounts allow you to do so, but you will not be able to feasibly do it until you have set up an account the proper way.

You will want to reach out to specific Self-Directed IRA administration firms to find out more about what sort of options they can facilitate. In many cases, a Self-Directed IRA administration firm simply carries out the transactions you want, handling issues like paperwork and other administrative needs. You will want to reach out directly to a Self-Directed IRA administration firm to find out what you can and cannot invest in once you have the ability to do so.

What is a “Bitcoin IRA”?

Given just how popular Bitcoin is these days, it is no surprise that you will see some accounts advertised as “Bitcoin IRAs.” There is, in fact, no such thing as a Bitcoin IRA, just as there is no such thing as a “Real Estate IRA.” However, this term is thrown around as a way to illustrate the kinds of assets you might be able to own within your IRA. It is something to be aware of as you research the different possibilities.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at

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