For over a decade, crypto has grown in popularity, during which we've observed the industry's ongoing evolution.
As the crypto landscape matures, more and more companies come online and provide services that simplify the process of buying and selling cryptocurrencies. Among these options, Crypto IRAs and Exchanges stand out. You may wonder, what sets the two apart? Well, there's more to the story, and it's not just about the basics of buying and selling crypto. It’s the taxes!
In this article, we’ll explore the difference between Crypto IRAs and Crypto Exchanges, highlighting the advantages that make Crypto IRAs a significant choice for many investors.
Crypto IRA vs. Crypto Exchange: What’s the difference?
First, let's go over the difference between a Crypto Exchange and a Crypto IRA.
Crypto Exchange
A crypto exchange is a platform that allows users to buy, sell, and trade cryptocurrencies. While it appears straightforward, engaging with these exchanges involves a significant challenge.
The taxes!
Tax Implications for Exchanges
If you are selling or trading crypto on an exchange, it can trigger a taxable event. This could mean you end up with significant capital gains taxes to pay and you'll need to provide detailed reports of all your cryptocurrency transactions to the IRS.
Let's look at an example:
Let's say you buy $10,000 worth of Bitcoin, and it increases to $60,000. That's a 50,000 gain. Sounds great right? But the issue is those profits are now subject to capital gains tax.
Now let's go over the Crypto IRA.
Crypto IRA
A Crypto IRA is an investment vehicle that allows investors to buy and sell cryptocurrencies within a regulated retirement account.
Sounds the same? There's a difference…
It’s the tax benefits!*
Crypto IRA Tax Implications
Crypto IRAs offer significant tax benefits, not available through Crypto Exchanges. Contributions to Traditional IRAs may be tax-deductible, and investments grow tax-deferred. In Roth IRAs, contributions are after-tax, but withdrawals are tax-free, benefiting crypto investors expecting asset appreciation over time.
Given these insights, a Crypto IRA presents a compelling, tax-efficient option for crypto investments, addressing the challenge of buying and selling within a Crypto Exchange.
Let's illustrate with the same example from above:
You buy $10,000 worth of Bitcoin in a Roth IRA, and its value increases to $60,000. That's a $50,000 gain. The best part is when you sell, you’re not subject to capital gains tax and you keep all of your profits!
It’s that simple!
This highlights the advantages of buying and selling crypto through a Crypto IRA versus a Crypto Exchange, the taxes!
What’s Your Choice?
Let’s recap the major differences between a Crypto IRA and a Crypto Exchange.
If you buy and sell crypto using a Roth IRA, you do not pay taxes on your profits.
If you buy and sell crypto using a Crypto Exchange, you will pay taxes on your profits.
While Crypto Exchanges offer direct access to the market, they come with significant tax complexities. In contrast, Crypto IRAs provide tax benefits and are structured for long-term financial planning. This is why Crypto IRAs have been growing in popularity.
For individuals interested in a Crypto IRA, iTrustCapital emerges as a premier platform that allows investors to buy and sell Crypto within a tax-advantaged IRA.
What are the benefits of iTrustCapital?
Tax Benefits: iTrustCapital offers tax-advantaged crypto IRAs. Whether it's the potential for tax-deferred growth in a Traditional IRA or tax-free withdrawals in a Roth IRA, iTrustCapital gives you the option to pick what’s right for you.
24/7 Accessibility: With iTrustCapital, access to your investments is available around the clock. Whether on a desktop or mobile app, the platform offers 24/7 accessibility.
Secure Asset Custody: At iTrustCapital, assets are securely held in a regulated chartered trust, ensuring off-balance sheet operations. This separation safeguards client assets from the company's financials, providing investors with enhanced security and peace of mind.
Fee Structure: iTrustCapital prides itself on its fee structure. There are no monthly, yearly, or maintenance fees, only transaction fees.
Learn more about the benefits here.
Now that you’re aware of the difference between a Crypto IRA and Crypto Exchange, take advantage of the tax benefits and open a Crypto IRA today!
*Some taxes and conditions may apply.
DISCLAIMER
This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
iTrustCapital is a cryptocurrency IRA software platform. It is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager, or adviser in the United States or elsewhere. iTrustCapital is not affiliated with and does not endorse any particular cryptocurrency, precious metal, or investment strategy.
Cryptocurrencies are a speculative investment with risk of loss. Precious metals are a speculative investment with risk of loss. Cryptocurrency is not legal tender backed by the United States government, nor is it subject to Federal Deposit Insurance Corporation (“FDIC”) insurance or protections. Clients do not receive a choice of custody partner. The self-directed purchase and sale of cryptocurrency through a cryptocurrency IRA have not been endorsed by the IRS or any regulatory agency. Historical performance is no guarantee of future results.
Some taxes and conditions may apply depending on the type of IRA account. Investors assume the risk of all purchase and sale decisions. iTrustCapital makes no guarantee or representation regarding investors’ ability to profit from any transaction or the tax implications of any transaction. iTrustCapital does not provide legal, investment or tax advice. Consult a qualified legal, investment, or tax professional.
iTrustCapital makes no representation or warranty as to the accuracy or completeness of this information and does not have any liability for any representations (expressed or implied) or omissions from the information contained herein. iTrustCapital disclaims any and all liability to any party for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this information, which is provided as is, without warranties.
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