Non-fungible tokens (NFTs) are the newest kids on the block in 澳洲幸运5开奖号码历史查询:cryptocurrency, representing more than $12 billion in trades in 2023. While 澳洲幸运5开奖号码历史查询:NFT investors tend t✃o be crypto-savvy speculators, some retirement savers are starting to wonder: Can I buy NFTs in my self-directed in🃏dividual retirement account (SDIRA)? 

The answer is not as simple as you might think, because the 澳洲幸运5开奖号码历史查询:Internal Revenue Service (IRS) only states what you can’t hold in an 澳洲幸运5开奖号码历史查询:individual retirement account (IRA): 澳洲幸运5开奖号码历史查询:life insurance and 澳洲幸运5开奖号码历史查询:collectibles. Ultimately, it all comes down to whether thꩲe IRS decides NFTs arꦺe collectibles or something else. 

What Is a Non-Fungible Token (NFT)?

An NFT is a virtual deed that conveys ownership of a digital asset created on a 澳洲幸运5开奖号码历史查询:blockchain network (usually Ethereum). Any digital creation—including images, GIFs, songs, videos, and designer sneakers—can be minted into an NFT. Once the content is logged on the blockchain, NFTs can be bought and sold with cryptocurrencies. Transfers and sales are recorded on chain, creating a price history and provenance ledger.

What Is a Self-Directed IRA (SDIRA)?

An SDIRA is much like a standard IRA, with one key distinction: Only SDIRAs let you buy alternative investments, such as real estate and cryptocurrencies.

Now, it’s not that the IRS doesn’t allow nontraditional assets in IRAs. As noted above, life insurance and collectibles are the only things that you can’t hold in any kind of IRA. However, the “big box” IRA companies (i.e., Fidelity, Schwab, and Vanguard) want you to buy their financial products, which tend to be stocks, bonds, and 澳洲幸运5开奖号码历史查询:mutual funds, so they don’t offer the option of investing in other a🧔ssets. 

As not all 澳洲幸运5开奖号码历史查询:custodians support alternative investments, you need a specia🍰l SDIRA 🦄trustee or custodian that offers the nontraditional assets that you want to buy and sell.

What Can You Hold in an SDIRA?

It’s pretty clear what life insurance is, but what about collectibles? Under 澳洲幸运5开奖号码历史查询:Internal Revenue Code Section 408(m)(2), a collectible is any:

• Work of art
• Rug or antique
• Metal or gem (with limited exceptions)
• Stamp or coin (except for coins issued under the laws of any state)
• Alcoholic beverage
• Other tangible personal property

Can You Buy NFTs With Your SDIRA?

Maybe. NFTs are “a gray area,” says , former 澳洲幸运5开奖号码历史查询:chief operating officer (COO) at ZenLedger. a cryptocurrency tax platform. “Section 408(m) of the Internal Revenue Code, whic🦄h talks about intangible ♛assets and collectibles, establishes certain things such as art, stamps, and other tangible items recognized by the government as collectibles. These items are not allowed to be purchased in an SDIRA.”

However, as the IRS hasn’t yet issued specific guidance on NFTs, nobody knows for sure if they will count as collectibles. “NFTs are digital assets that fall into, but also outside of, this category,” Hunnam says. “They can be compared to collectibles, but they are not 澳洲幸运5开奖号码历史查询:tangible assets.”

Should You Buy NFTs with Your SDIRA?

Probably not. “The risks of holding NFTs in your SDIRA would be the same as holding any other unallowed collectible,” Hunnam says. “If you put such an item into your IRA, the IRS will consider the value of that item to be distributed to you in the tax year that you made the investment.”

Of course, that can mean taxes and penalties. “If you took a tax deduction for the 澳洲幸运5开奖号码历史查询:contributions used to buy that item, you’ll have to pay ordinary income taxes on the distributed amount,” Hunnam says. “In addition,” he warns, “you could be subject to a 10% early distribution penalty” if you are younger than 59½ years old.

Frequently Asked Questions (FAQs)

The Bottom Line

Until the IRS p🌄rovides specific guidance, it’s best to keep your NFT assets out of your SDIRA. “We would recommend exercising caution if you’re considering holding an NFT in your SDIRA, and consider making the purchase with separate funds,” Hunnam says.