If you’ve conducted a little research into the possibility of opening an IRA Bitcoin account, in order to secure your financial future and independence, you may be puzzled by some of the Bitcoin IRA rules which you’ll be obligated to adhere to. In order to discover why each rule exists, simply continue reading in order to find out, the reasoning behind Bitcoin IRA rules.
3 Of the reasons why Bitcoin IRA rules exist:
- Why you’re not permitted to touch your Bitcoin investment till you turn 59 and a half
The primary reason why citizens are barred from touching their Bitcoin IRA account until they are 59 and a half is to prevent individuals who are simply trying to make a quick short-term profit, from using a Bitcoin IRA account to avoid paying taxes on your Bitcoin purchases. As one of the distinct advantages of choosing to purchase Bitcoin for an IRA retirement fund is that you’ll be able to purchase Bitcoins as often as you’d like without having to pay tax on your purchases.
While the government is obviously trying to encourage citizens to actively save and make wise investments for their futures, in order to fund their retirements, the government wants to avoid encouraging citizens to try and make short-lived profits using Bitcoin.
- Why you’re allowed to use your Bitcoin profit in an exceptional circumstance
While most IRA account holders will find that they’re subject to financial penalties if they choose to flout the law and make an early withdrawal from their account, there are a few exceptional circumstances in which IRA Bitcoin account holders may be able to get their hands on a portion of their Bitcoin profit.
Two of the most common of which are if you choose to pursue higher education and require money in order to pay for your college fees. Or if you have found the perfect first home and need a cash influx in order to make an acceptable deposit on your chosen property.
Depending on your individual circumstances you may also be allowed to withdraw money from your account if you need to pay for a surprise funeral or wish to help your child attend pay for college associated costs. If you have a genuine reason for needing to access your Bitcoin profit, which your case officer deems as being as important as saving for your retirement, it’s likely that you’ll be granted a one-off penalty exemption.
- Why you have to pay tax on your profits when you choose to make your first withdrawal from your IRA Bitcoin account
You may be a little confused as to why you don’t have to pay tax when you purchase Bitcoin for your IRA account but you’re still required to pay tax on your profits when you start accessing your IRA account. The reasoning behind this decision is that while the government aims to encourage citizens to purchase Bitcoin, that the government still wants to take a fair share of any profits which they’ve effectively helped you obtain.
Hopefully, after reading about the reasoning behind common Bitcoin IRA account rules and regulations, you have a better understanding of why each rule was put in place!