The Silent Killer of Crypto Gains
Crypto investing is full of excitement. Imagine putting $10,000 into Bitcoin and watching it grow to $100,000 over a few years. That $90,000 profit feels like the kind of success story people dream about when they enter the world of digital assets.
But here’s the part many investors overlook…the taxes.
In the eyes of the IRS, cryptocurrency is considered taxable property. That means every time you buy, sell, or swap, you’ve potentially triggered a taxable event. Also, the tax rate you pay depends heavily on how long you’ve held it.
If you held it for under a year and sold, your gains are considered short-term, taxed as ordinary income up to 37%.
If you held it for more than a year and sold it, your gains usually qualify for long-term capital gains rates, generally between 0% and 20%.
Now let’s revisit that Bitcoin example. If you turned $10,000 into $100,000 and sold it after less than a year, you could owe more than a third of your $90,000 profit in taxes. Even at long-term rates, that’s still a hefty check to the IRS. Multiply that across multiple trades or portfolio rebalances, and your big wins don’t look quite as big once Uncle Sam takes his share.
Why Crypto Exchanges and Crypto Wallets Can Be Tax Traps
If you’re using a traditional crypto exchange or wallet, here’s the reality:
- Buying and selling? Taxable.
- Swapping Bitcoin for Ethereum? Taxable.
- Even certain wallet-to-wallet transfers can create reporting obligations.
This means that active traders, portfolio rebalancers, or even casual investors can quickly find themselves buried in tax complexity. While the gains are real, the after-tax returns can be a far cry from the headline numbers often shared on social media.
How to Save on Taxes With Crypto
Everyone loves the idea of big crypto wins. But what really matters is how much of those gains you actually keep. That’s where a Crypto IRA comes in, a self-directed special retirement account that lets the simple breakdown: you buy and sell crypto with tax advantages not seen with crypto exchanges.
Think of it like this. You get the growth potential of Bitcoin and Ethereum, combined with the tax perks of a retirement account like an IRA. Instead of losing a chunk of every gain to the IRS, your money stays in the account and could keep growing for you.
Are There Different Types of Crypto IRAs?
Yes, and the difference comes down to when you pay taxes:
- Traditional Crypto IRA: You may get a tax break on the money you put in now. Your crypto then grows tax-deferred, and you’ll only pay taxes when you withdraw in retirement.
- Roth Crypto IRA: You contribute money you’ve already paid taxes on, but when retirement comes, every dollar, including your gains, can be withdrawn completely tax-free.
Both are solid options, but for long-term believers in Bitcoin and Ethereum, the Roth IRA can be especially appealing. Paying taxes now in exchange for decades of potential tax-free growth is a trade many investors are happy to make.
Crypto Exchange vs. Crypto IRA: Why Taxes Make All the Difference
Here’s a simple example to show the impact.
- Investor A (Exchange): Buys $20,000 worth of Bitcoin. Five years later, it’s worth $60,000. That $40,000 gain triggers a capital gains tax bill of $8,000–$15,000, depending on income and state.
- Investor B (Crypto IRA): Makes the same $20,000 Bitcoin investment but inside a Crypto IRA. Five years later, the account is also worth $60,000. With a Traditional IRA, taxes aren’t due until you take distributions (withdrawals). With a Roth IRA, gains can be withdrawn completely tax-free once the account has been open at least 5 years and you’re age 59½ or older.
Over decades, that difference can mean hundreds of thousands of dollars more in your pocket.
Other Tax-Advantaged Opportunities in a Crypto IRA
The tax savings alone make a Crypto IRA attractive, but that’s only part of the story. Some Crypto IRAs also give investors the chance to earn staking rewards, extra income just for holding certain cryptocurrencies that help secure their networks.
Take Ethereum, for example. Since moving to a proof-of-stake system, investors who “stake” their ETH are rewarded with additional ETH over time. It works a lot like earning interest in a savings account — only the payouts are in crypto.
Normally, staking rewards are taxed as income the moment you receive them, which can add yet another layer of reporting at tax time. But when staking happens inside a Crypto IRA, those rewards fall under the same tax advantages as your other investments. In a Traditional IRA, they grow tax-deferred until retirement. In a Roth IRA, they can even be withdrawn tax-free down the road.
That means a Crypto IRA isn’t just about avoiding taxes on buy-and-sell gains. It can also be a way to build passive income, with rewards stacking up over time, all inside a tax-advantaged account.
iTrustCapital: The World’s Largest Crypto IRA
If you’re giving away a chunk of your crypto gains to the IRS, you’re leaving money on the table. The smartest investors know it’s not just about how much you make, it’s about how much you keep.
A Crypto IRA lets you buy, sell, and even stake digital assets in a tax-advantaged* account, turning today’s wins into tomorrow’s wealth. Instead of stressing over tax bills every year, you can focus on building your future.
Today, iTrustCapital is the largest Crypto IRA platform serving nearly 100K working professionals across America. With a simple, accessible way to combine crypto and powerful IRA benefits, iTrustCapital makes it easier than ever for working professionals to take control of their financial future.
Here’s why:
- 11,000+ Excellent Reviews: Real reviews by clients across Google and Trustpilot
- Award Winning Platform: A simple, intuitive platform, on desktop and mobile, built for both beginners and experienced investors.
- Dozens of Assets: Over 85 cryptocurrencies and precious metals, all in one account.
- 24/7 Access: You can buy and sell anytime, anywhere.
- Low Fees: Charges a 1% transaction fee
- Crypto Staking: Earn rewards when you stake popular cryptocurrencies, such as ETH and SOL.
- U.S.-Based Regulated Custody: Leveraging regulated bank and trust company partners and institutional crypto storage providers to secure client assets. Assets held 1:1 off-balance sheet For the Benefit Of (FBO) clients.
- Premium Custody Accounts: A secure way to buy and sell crypto outside of an IRA, alongside your Crypto IRA in a secure closed loop system.
If you’re interested, open a Crypto IRA at iTrustCapital today!
*Some taxes may apply.
iTrustCapital is a fintech software platform for alternative assets. iTrustCapital 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 digital asset, precious metal or investment strategy.
Investing in any digital asset or cryptocurrency (including meme coins) carries significant risks due to their speculative and highly volatile nature. Staking involves considerable risk.
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