Does putting mining profits into an IRA defer tax?

blade52x

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Sep 9, 2006
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Anyone know? I'm wondering if mining and dumping the profits into an IRA defers the tax. I figure the investment growth over a 30 year span would greatly outweigh the final tax still owed in the end after it starts being withdrawn. I know mining isn't very profitable anymore, but this is more for profits earlier this year, as well as potential future profits if things pick up again.
 
Traditional IRA defers tax until withdrawal. ROTH IRA pay tax now, no tax when later withdrawal.
 
You would have two transactions:

1) taxable income from mining + selling bitcoins
2) tax deduction from putting cash into a deductible IRA (if eligible)

These are really separate concerns. If your tax rates are low now, ROTH IRA is nice, if they're high, deductible IRA is nice (but you may not be eligible), even a non-deductible IRA is helpful for deferring taxes on dividends or interest from stocks and bonds held in the IRA, but there's also the backdoor ROTH: you put into a non-deductible IRA and then convert to ROTH immediately, subject to some limitations. Not sure if [H] is the best place to discuss the finer points of IRAs though ;)
 
You need to keep in mind that profits from mining is still just income, the source is immaterial. So regardless of which IRA vehicle you wish to use the source of the income doesn't matter, only if that income is taxable or not. The IRS is not going to treat it differently because you say it came from bit-coin mining then it would if it came from your paycheck, it's just income.
 
Further, remember you can only fund up to the max contribution into your IRA depending on age ($5500/$6500).
 
Further, remember you can only fund up to the max contribution into your IRA depending on age ($5500/$6500).

The mining would be treated as a business on schedule E, which opens up the SEP IRA and SIMPLE IRA options that will give him a much higher ceiling...
 
The mining would be treated as a business on schedule E, which opens up the SEP IRA and SIMPLE IRA options that will give him a much higher ceiling...

Ah yes, because I'm sure he is paying self-employment taxes. :rolleyes:
 
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