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Bitcoin IRA: How to hold crypto in your retirement account

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Published on March 26, 2025 | 4 min read

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Leaves in the shape of a Bitcoin symbol.
Images by Getty Images; Illustration by Bankrate

Bitcoin has been a popular asset for years, and while it’s been volatile during the course of its lifetime, this cryptocurrency has risen over time. So traders may be inclined to buy Bitcoin and other digital assets inside an IRA, giving them potentially huge tax-advantaged gains. To do so, traders need a special type of account called a Bitcoin IRA, which can hold cryptocurrencies.  

Here’s how a Bitcoin IRA works and what you need to know about it. 

What is a Bitcoin IRA?

A Bitcoin IRA is a special kind of self-directed IRA that allows traders to hold cryptocurrencies such as Bitcoin and enjoy the tax advantages of an IRA. You can buy and sell Bitcoin and other cryptocurrencies in the IRA, and the account’s custodian holds the assets and ensures that any deposits to and withdrawals from the account are properly recorded and reported to the IRS. 

Bitcoin IRAs can be opened at firms specializing in self-directed IRAs that offer crypto trading. The contribution limits for a Bitcoin IRA are exactly the same as they are for regular IRAs. You can contribute as much as $7,000 (for 2025) or $8,000 if you’re age 50 or older. 

How Bitcoin IRAs work

Bitcoin IRAs work like a regular IRA in all legal and financial respects. The contribution rules are the same, and the distribution rules are the same. The key difference is that Bitcoin IRAs let you own and trade cryptocurrencies directly, which is not something that many traditional online brokerages offer. So a Bitcoin IRA lets you buy and sell digital assets within the IRA structure.

The IRA is a tax-advantaged account that allows your money to grow on a tax-deferred or a tax-free basis, depending on the type of IRA you use. With a traditional IRA, you won’t pay tax on your contributions, and they can grow tax-deferred until you withdraw them, at which point they become taxable. With a Roth IRA, you pay tax on contributions, but they can grow tax-free and can be withdrawn tax-free.

If you work with a Bitcoin IRA firm, you can buy and sell cryptocurrencies through the firm, which will then hold and safeguard your digital assets and cash. You’ll typically pay various account fees, such as a custodial fee, for the IRA firm to oversee your assets, and you’ll pay trading fees when you buy and sell cryptocurrencies. 

If you withdraw your assets from the account, you’ll be taxed on the distribution unless you transfer it to another IRA in a short period.

Types of Bitcoin IRAs

Traditional Bitcoin IRAs: This kind of IRA is funded with pre-tax contributions, meaning that you get a tax break on your contributions. Your money can grow tax-deferred until you withdraw it in retirement, at which point you’ll pay tax at ordinary income rates. 

Roth Bitcoin IRAs:Roth IRA is funded with after-tax contributions, meaning that you won’t get a tax break on contributions. Your money can grow tax-free until you withdraw it in retirement, when you can avoid all further taxes on your gains.

SEP Bitcoin IRA: An SEP IRA is a retirement account for small businesses, and it allows participants to save a lot more than in either a traditional or Roth IRA. You’ll need to be a qualifying business or self-employed individual to make use of this plan.

Pros and cons of Bitcoin IRAs

Pros

Cons

Alternative ways to invest in Bitcoin through an IRA

While you can invest in cryptocurrencies directly and hold them in a special IRA, it could make a lot of financial sense to simply invest in cryptocurrency through exchange-traded funds. These funds own the cryptocurrency and charge a relatively modest fee to manage the fund. These funds safeguard their coins, and they’re easy to purchase through a typical online brokerage. 

By investing in cryptocurrency ETFs, you can enjoy the price appreciation of cryptocurrency without paying the sometimes-hefty costs of a self-directed IRA. With an ETF, you get all the same benefits of owning crypto, and you can work with a major low-cost IRA broker. 

The most prominent crypto funds now are Bitcoin ETFs, which were introduced in January 2024, and Ethereum ETFs, which were introduced later that year. Now a range of new funds is on the way to track the most popular cryptocurrencies, including Solana, Avalanche and many more.    

Bottom line

A Bitcoin IRA can allow traders to own Bitcoin and other digital currencies in a tax-advantaged retirement account, though they should be aware of the significant risks of investing in crypto. Given the often-high costs of self-directed IRAs, it may make sense to invest in cryptocurrencies via ETFs that track these assets while owning them at one of the best brokers for IRAs.  

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.