According to CryptoPotato, the Internal Revenue Service (IRS) announced on November 1 that the limit on annual contributions to an Individual Retirement Account (IRA) has been increased to $7,000 for the 2024 tax year, up from $6,500. The 401(k) limit also increased by $500 to $23,000. This means that Bitcoin investors saving for retirement with a self-directed Bitcoin IRA can contribute $500 more next year.
Investors looking to hedge inflation, diversify their portfolio, or add a risk-reward, high-growth tech play to their strategy can also benefit from tax advantages with a Bitcoin IRA or 401(k) account. According to Forbes Advisor, a Bitcoin IRA can provide taxpayers with the tax advantages of traditional and Roth IRAs, allowing them to deduct their contribution from their taxable income. Jay Blaskey, head of sales at BitIRA, states that under the umbrella of self-directed IRAs, Americans have the option to purchase a wide variety of alternative assets, including gold, real estate, and cryptocurrencies like Bitcoin.
Some 401(k) savers may also have the option to contribute Bitcoin to their 401(k) and receive a tax benefit if their employer allows it and works with a pension fund that provides digital asset services. Otherwise, they must use a self-directed Bitcoin IRA to obtain a tax deduction. Fidelity Investments, for example, works with 23,000 employers to maintain Bitcoin 401(k) retirement accounts through its Digital Assets arm, which provides digital custody services. Investors are obligated to report capital gains from any cryptocurrency holdings to the IRS, as the agency is increasing enforcement on unreported income from digital assets this year.
