Bitcoin in an IRA or 401(k)

Traditional and Roth IRA (including self-directed IRAs)

What is allowed: The IRS treats virtual currency as property. Its virtual currency FAQs do not mention IRAs. The only IRS collectibles guidance on digital assets found (Notice 2023-27) deals with NFTs, using a look-through test. No IRS guidance was found that names bitcoin as a collectible or approves it for IRAs. Since 10 January 2024 the SEC has allowed spot bitcoin exchange-traded products to list on US exchanges, and these are listed shares that can be held like other exchange-traded securities.

Tax: An IRA is generally exempt from tax (408(e)(1)). If an IRA buys a collectible, the cost is treated as a distribution. The IRS says this is generally taxed as ordinary income, the 10% additional tax may apply under age 59 1/2, and the owner then has basis in that amount. A prohibited transaction can end IRA status from the first day of that tax year (408(e)(2)).

401(k) and other employer plans with participant-directed accounts

What is allowed: In March 2022 the Department of Labor (Compliance Assistance Release 2022-01) told 401(k) fiduciaries to use 'extreme care' before adding crypto options. On 28 May 2025 it rescinded that release (2025-01) and said it neither endorses nor disapproves of crypto options; normal ERISA prudence rules apply. An executive order of 7 August 2025 asked for wider access to alternative assets in 401(k)s, and the DOL proposed a rule on 30 March 2026 whose guidance covers digital assets, with comments due 1 June 2026.

Tax: Buying a collectible in an individually directed account is treated as a distribution equal to its cost; the IRS says this is generally taxed as ordinary income and the 10% early-withdrawal tax may apply.

Watch out for:

• Plan participants can only choose from the options the plan offers; a crypto or metals option depends on the plan fiduciary.
• The 2026 DOL proposed rule was not confirmed as final at the time of research.