5 Best Crypto IRAs for 2021

Ty GainesUpdated at: Jul 29th, 2021

Learn everything you need to know about crypto tax in our Cryptocurrency Tax Guide

Cryptocurrency markets tend to be volatile, so these assets may not be your first thought when considering a long-term retirement strategy. However, using a self-directed IRA to buy bitcoin or other tokens may allow you to avoid capital gains taxes. Thus, crypto IRA investing may be an option to consider for those with a higher risk appetite — and a long-term hodl strategy.  

What is a crypto IRA?

The terms “cryptocurrency IRA” or “bitcoin IRA” refer to self-directed individual retirement accounts (IRA) that invest in cryptocurrencies as well as or instead of traditional assets.

What are the tax benefits of including crypto in an IRA?

IRAs receive preferential tax treatment from the IRS. If you don’t expect to sell a crypto asset until you reach retirement age, you may be able to avoid paying capital gains tax if you buy it with your IRA. 

Contributions of crypto to a traditional IRA are tax deductible, assuming you meet certain income thresholds set by the IRS. When you cash out your IRA, you will owe regular income taxes on the withdrawal of funds, provided you wait until you are retirement age.  In a crypto Roth IRA, you do not pay capital gains tax on any increase in the value of your crypto. However, you will not be able to deduct the deposit from your income for tax purposes. That said, there is a trade off. When you make a qualified distribution of a Roth IRA, you will not pay any taxes because you paid them at the time of deposit. 

Two less common types of IRAs are SEP-IRAs and SIMPLE IRA. These are most frequently set up by small business owners to provide and contribute to their employees’ retirement accounts. Contributions to SEP-IRAs and SIMPLE IRAs receive deferred taxation and are taxed as income upon withdrawal, just like a traditional IRA. 

What are the risks of buying crypto with an IRA?

You cannot withdraw IRA funds without penalty until you reach retirement age, which is currently set by the IRS at 59 ½ years old. Although there are some exceptions, most early withdrawals from IRAs are subject to general income tax plus a 10% penalty.  

Additionally, if upon cashing out an IRA has decreased in value, that decrease cannot be reported as a capital loss or as an itemized deduction. Before 2018, if the combination of IRA losses and all other miscellaneous losses exceeded 2 percent of an individual's adjusted gross income, IRA losses could be reported as a miscellaneous itemized deduction. However, the Trump administration's Tax Cuts and Jobs Act of 2017 made all losses nondeductible until at least 2025.

How can I invest my IRA in crypto?

An IRA requires a custodian; an entity that ensures the IRS’s conditions for preferential tax treatment are upheld. When IRAs contain traditional assets, this custodian is usually a bank or other large financial institution. However, for those interested in buying crypto with their IRA, there are an increasing number of services that will take on this role. 

The best crypto IRA platforms

Below, we run through the top crypto IRA platforms, what crypto assets they support, and what their fees and pricing structures look like: 

BitcoinIRA 

A large and trusted IRA provider, BitcoinIRA boasts a user-friendly interface, 24/7 real time trading, and full phone support. It supports a rather limited list of cryptocurrencies — Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash and Ethereum Classic. However, its smooth user experience makes it a good choice, particularly for newer traders who are rolling over their IRAs from traditional providers. 

More advanced traders may also be interested in BitcoinIRA Earn. This new product allows users to lend their IRA funds in exchange for monthly interest income. 

BitcoinIRA’s account and maintenance fees vary based on a user’s initial deposit size.

iTrustCapital

iTrustCapital is another major provider. It stands out for its transparent and straightforward pricing: a $29.95 monthly service fee and a 1% charge on crypto trades. This is a bonus for those with large balances, who can accumulate significant fees in other pricing arrangements. This provider does require an account balance of $2,500 and a contribution minimum of $1,000. 

iTrustCapital supports the following coins, plus gold and silver: Bitcoin, Litecoin, Ethereum, Bitcoin Cash, EOS, Stellar, Chainlink, Cardano, and Polkadot.  

BitIRA

BitIRA’s point of difference is its security. In addition to using cold storage, BitIRA also provides $100 million of end-to-end insurance. It supports Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Bitcoin Sv, Zcash, and Stellar Lumens. 

BitIRA charges users a $195 annual fee, plus a $50 account establishment fee and a monthly 0.05% storage fee.

Broad Financial

Broad Financial offers self-directed IRAs with checkbook control.

After you open your IRA, the company creates an LLC and invests your funds in it. Broad Financial serves as custodian of the LLC, and will issue you a capitalization check that allows you to open a checking account for your IRA. This makes it easy to invest those funds in almost any asset you wish, including cryptocurrencies that are not supported by other crypto IRA providers. 

Broad FInancial has a flat fee structure. It costs $1,400 to open an account and about $320 per year after that. 

Alto CryptoIRA

Alto is a start-up that aims to give investors more control over their IRAs by providing more access to alternative assets. Recently, it gained attention for becoming LendingClub’s preferred IRA provider. 

Alto’s CryptoIRA product integrates directly with cryptocurrency exchange Coinbase. This makes trading easy and means that the platform can support more coins than most crypto IRA providers. At the time of writing, users could choose from 32 coins, including DeFi tokens such as COMP, REN, and UNI.

Alto’s fees are based on your account size, but range from $2–$25 per month with a 1.5% trade fee.  

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