More investors are using self-directed IRAs (SDIRAs) to hold crypto, but storing it the wrong way can lead to tax penalties. Unlike stocks, digital assets require special handling to stay compliant with IRS rules.

IRS Rules on Crypto Storage

The IRS treats crypto as property, meaning it must be held by your IRA—not you personally. That means no storing coins on personal wallets or exchanges in your name. Your SDIRA must have direct control over the assets to stay compliant. Read the IRS guidelines here.

Secure Storage Options

• Custodial Wallets – Your IRA custodian holds the keys, ensuring compliance.
• Checkbook IRA LLC – If structured correctly, the LLC can hold assets in an institutional-grade wallet.
• Cold Storage with a Third Party – Some providers offer vault storage that meets IRS standards.

Mistakes That Can Trigger IRS Penalties

• Using a Personal Wallet – If you control the private keys, the IRS may view it as a distribution.
• Trading on Personal Accounts – All transactions must flow through the IRA.
• Commingling Funds – Never mix personal and IRA-held crypto assets.

Crypto in an SDIRA offers tax advantages, but you must follow the rules. Work with an experienced custodian and use IRS-compliant storage. If structured properly, crypto can be a powerful addition to your retirement portfolio. Learn more about SDIRA crypto compliance.