Crypto Tax Strategies in 2026: Pay Less, Keep More

Crypto is back. With Bitcoin and major altcoins up 20–30% in 2026, gains mean taxes—and the IRS is watching. You must report crypto activity on your federal return (Form 1040), answering the digital asset question before you even list your income. The good news: legal, proven strategies can significantly reduce your tax bill. Below are five high-impact strategies you may want to consider.

How Crypto Gains and Losses Are Taxed

Every crypto-to-crypto trade (e.g., BTC → XRP), sale, or spend is a taxable event.

• Held ≤12 months: Short-term capital gain/loss, taxed at ordinary income rates (up to 37%)
• Held >12 months: Long-term capital gain/loss, taxed at 0%, 15%, or 20% depending on total taxable income

Most investors should seek to avoid short-term capital gains, as they are generally taxed at significantly higher rates than long-term capital gains. The primary exception is when those gains can be offset with short-term capital losses—a strategy we will discuss later.

It is also important to note that most investors will never reach the 20% long-term capital gains bracket. In 2026, the 20% rate generally applies only when taxable income exceeds approximately $600,000 for married couples filing jointly, $545,000 for single filers, or $579,000 for heads of household. See the table below for reference.

Many investors instead fall within the 0% or 15% long-term capital gains brackets, creating valuable opportunities for proactive tax planning.

The 0% Capital Gains Bracket (2026 Thresholds)

Long-term capital gains tax depends on total taxable income (after deductions). For 2026, the 0% bracket typically extends up to approximately:

• Married Filing Jointly: ~$100,000
• Single: ~$50,000
• Head of Household: ~$66,000

Example: A married couple with $120,000 gross income and a $32,000 standard deduction has $88,000 taxable income. They can realize up to ~$12,000 in long-term crypto gains and still pay 0% federal tax on those gains.

Tactical tip: If you’re near a bracket threshold, stage sales across years to stay in the 0% or 15% zone—avoiding a jump to 20%.

Strategy 1: Crypto Tax-Gain Harvesting

Don’t wait for losses to act. Proactively realize gains up to the top of your current bracket (0% or 15%). This reduces future taxable gains when you eventually sell—all while staying in a lower tax tier today.

Example: If you’re close to a tax-bracket threshold, consider selling just enough crypto to realize gains while remaining in the lower bracket. This allows you to lock in gains at a lower tax rate today rather than potentially paying a higher rate in the future. If your objective is a long hold, you may repurchase the asset shortly after the sale. 

Best for: Investors in the 0% or 15% long-term brackets who expect higher income (or rates) later.

Strategy 2: Tax-Loss Harvesting (No Wash-Sale Rule for Crypto)

When crypto dips, sell to lock in losses—then immediately rebuy the same asset. Unlike stocks, the wash-sale rule does not apply to crypto under current IRS guidance, so you can maintain market exposure while harvesting losses to offset other gains.

Example: Buy BTC at $90K, it drops to $60K. Sell to realize a $30K loss, rebuy at $60K. Use that loss to offset $30K in gains elsewhere, deferring or eliminating tax.

Note: Legislation has been proposed to extend wash-sale rules to crypto, but as of 2026, it remains inapplicable.

Strategy 3: Hold & Trade Crypto in a Roth IRA (or Other Tax-Advantaged Accounts)

A crypto Roth IRA lets you buy, trade, and grow digital assets tax-free—no capital gains, no short-term rates, and qualified withdrawals in retirement are 100% tax-free.

• Works with BTC, ETH, SOL, XRP, and more (via self-directed IRA custodians, such as Directed IRA)
• Ideal for long-term believers who won’t need the funds before age 59½ 
• Additional tax advantage accounts include kids Roth IRA (with earned income), Coverdell ESAs (education), and HSAs (healthcare)—all holding crypto as the underlying asset

Each account offers powerful tools to strengthen your tax-planning strategy. For guidance on tax-advantaged accounts—and help choosing and opening the right one—contact my team at Directed IRA to discuss an option tailored to your goals. 

Note: Contributions require earned income and stay within annual IRA limits ($7,000 in 2026, or $8,000 if 50+)

Strategy 4: Borrow Against Crypto—Don’t Sell

Need liquidity? Take a loan secured by your crypto holdings instead of selling. Debt isn’t taxable income, and you can defer capital gains indefinitely while accessing cash flow.

• Interest rates have improved as more lenders enter the crypto-collateral space, however, interest rates can still be volatile 
• The asset’s appreciation should outpace the interest accruing on the loan
• Risk-aware investors monitor loan-to-value (LTV) ratios to avoid forced liquidations in downturns

Use case: Fund living expenses, real estate, or new investments—without triggering a tax event.

Strategy 5: Charitable Remainder Trust (CRT) for $1M+ Gains

For ultra-high-net-worth investors, a Charitable Remainder Trust offers triple benefits:

• Immediate charitable deduction on your taxes (e.g., donate $1M in appreciated BTC)
• Tax-free sale of crypto inside the trust (no capital gains)
• Lifetime income stream (up to 20 years or life expectancy) paid to you

At your death, any assets remaining in the trust pass to charity rather than directly to your heirs. However, the trust may be structured to purchase a life insurance policy on your life, with the policy proceeds potentially passing to your children on a tax-advantaged basis.

This strategy is highly complex, and this article provides only a simplified overview. For guidance on whether it is appropriate for your situation—and how to structure and implement it to support your estate-planning goals—schedule a consultation with my law firm, KKOS Lawyers.

Best for: Ultra-high-net-worth investors seeking to combine estate planning, lifetime income, charitable giving, and tax-efficient planning for substantial crypto gains.

Quick Recap: 5 Ways to Slash Crypto Taxes in 2026

1. Harvest gains strategically to maximize 0%/15% brackets
2. Harvest losses freely by selling to lock in losses then immediately rebuying the asset
3. Go tax-free with Roth IRAs, HSAs, or Coverdells holding crypto
4. Borrow, don’t sell to access value without triggering gains
5. Use a CRT for seven-figure gains: deduction + tax-free growth + income + legacy planning

Taxes are unavoidable—but overpaying isn’t. 

Download the FREE CRYPTO BEGINNER’S GUIDE and learn how a Roth IRA, traditional IRA, or HSA can buy and sell cryptocurrency tax-free! Buying Crypto in an IRA (Beginner’s Guide) 

Book a free call with my law firm KKOS Lawyers to learn how we can analyze 30 other tax strategies like this to help you pay less in taxes. Meet with Client Advisor 

Put your retirement dollars into the assets you actually believe in — BOOK A FREE CALL with DirectedIRA and set up a crypto Roth IRA today! Book a Call | Self-Directed Account Specialists 

You will die someday, and when that happens, everything you own will go to someone else. If you do not have a will, a court—not your family and not your stated wishes—will decide who receives your property based on your state law. This article walks you step by step through creating a simple, legally valid will. It is not a full estate plan, but if you currently have nothing in place, it is the fastest way to document your wishes so they are followed. 

What We’re Creating: A Simple Handwritten Will

We are creating a simple handwritten will, also known as a holographic will. This document must be handwritten and signed by you; in many states, those requirements make it legally valid and enforceable. Do not type and print this will, because it will no longer constitute a handwritten / holographic will. If you want to use this simple approach, the entire will must be in your handwriting.

Each state has unique laws regarding handwritten wills, and the laws of the state where you reside will apply to you. Many of these states do not require witnesses or other formalities, but each state is different, so you should research your state’s requirements before writing your handwritten will.

Step 1: What We’re Creating: A Simple Handwritten Will

First, write ‘Last Will and Testament’ at the top of the page. Next, include your full legal name, a statement that you are of sound mind, and the date. For example, I might write: ‘I, Mat Sorensen, being of sound mind, declare this to be my last will and testament. I revoke all prior wills and codicils.’ This language makes it clear that this document controls and cancels any earlier wills or similar documents.

Step 2: Identify Your Family

Next, you need to identify your family. Clearly state whether you are married and, if so, name your spouse. State whether you have children, and if you do, list each child in the will. This helps anyone reading the will understand whether someone was intentionally left out or simply omitted by mistake. For example, if you have three children but only list two and do not clearly disinherit the third, a court might decide to divide your estate among all three. To avoid confusion, list each child and, if you intend to disinherit someone, state that directly. Keep this section simple and factual by stating your relationships and names without extra language like ‘my favorite’ or ‘my first-born.’

Step 3: Name Your Executor

In this step, you will need to name an executor. This is one of the most important decisions in your will, because the executor handles your estate, pays any debts or taxes, and has the authority to distribute your assets.

In your handwritten will, write something like: ‘I designate [Full Name] as executor of my estate.’

In many cases, people choose a spouse or one of their children, often someone who is responsible, good with money, and able to handle the emotional and financial duties involved. You may also want to name a backup executor in case your first choice has died or is unable to serve. When listing your executor, include their full name, their relationship to you, and the city and state where they live.

Step 4: Name Your Guardian

If you have any children under 18, naming a guardian is essential. This can be one of the most critical sections of your will, because you are choosing who would raise your children if you pass away. You may feel that your parents are the best choice, but that may not be ideal if they would rather be grandparents than take on the full responsibility of parenting again. You might instead consider a sibling with children of similar ages, or a close friend or cousin you trust and who shares your values.

Note that the person you name is not automatically guaranteed to become the guardian. A court will ultimately decide who serves, based on who steps forward and what is in the best interests of your children, but judges give significant weight to the person you name in your will. If you do not list anyone, the court will decide without your guidance, which can lead to conflict within your family at a time when they are already grieving. Your family will want direction from you, so clearly list who you would want to serve as guardian for your children.

Step 5: List Specific Gifts (Optional But Helpful)

If there are particular items you want to leave to specific people, you should list them clearly. For example, you might leave a piece of jewelry to your daughter, a shared boat to your brother, or a business interest to your business partner. When you do this, be specific so there is no confusion about what goes to whom, such as: ‘I leave my electric guitar to [Full Name] in [City, State].’ The goal is to describe each item and recipient clearly enough that no one can reasonably dispute your intent. Do not overthink this section; if it slows you down, you can skip it for now and add or adjust specific gifts later. The purpose of this handwritten will is speed and clarity so you can get something in place, knowing you can always revise it in the future.

Step 6: Distribute the Rest of Your Estate

This section explains who receives the rest of your estate. It is the core distribution section of your will and is often called the ‘residual’ clause, because it covers everything that has not been specifically given away earlier. After any specific gifts you list, this clause directs all remaining assets to the people you choose in the percentages you select.

If you are married, you may want your spouse to receive everything that is left. You could say, ‘If I pass away, my surviving spouse receives the entirety of my residual estate.’ If your spouse has already died, or if you are single, you can then direct your remaining estate to your children or other beneficiaries in whatever percentages you decide.

When naming your children—whether they inherit if your spouse is not living or you are single and they are your primary beneficiaries—you should specify their shares as percentages. For example, if you have two children, you might have each inherit 50% of your estate, or you might choose a different split such as 10% for one child and 90% for the other. It is your wealth and legacy, and you decide how it is divided.

When writing this clause, you might say something like, ‘I leave the remainder of my estate to my children, to be split evenly, 50% to each.’ The key is to make it crystal clear who gets what. A simple handwritten will will not cover every possible contingency, such as what happens if a child dies before you or whether that child’s share should pass to their own children. Those details are usually addressed in an estate plan which is more comprehensive. 

Step 7: Add A Contingency Clause

If you want to add more detail about contingent beneficiaries, you can do that in this section. A common approach is to say something like, ‘If any of my beneficiaries listed above are deceased at the time of my death, I want their share to go to their descendants, per stirpes.’ This means that if you have four children who each receive 25% of your estate and one child dies before you, that child’s 25% share would go to that child’s heirs rather than being split among the surviving siblings. You may prefer a different approach, but using a per stirpes designation is a simple and widely used way to make sure a deceased beneficiary’s share passes down their family line.

Step 8: Funeral and Final Wishes (Optional)

Now you will state your funeral and final wishes. Indicate whether you prefer cremation or burial and note any preferences for the type of service, such as military or religious. You can also include any special requests that matter to you. This section is optional, and if you are trying to complete this handwritten will quickly, you can keep it very brief or skip it entirely as it is optional.

Step 9: Sign and Date Properly

This step makes this document official. You must physically sign and date your written will by hand. If your state requires witnesses or a notary, ensure they observe your signature and signing date. Not every state requires witnesses or a notary, so research your specific state’s requirements to ensure your written will is valid. In most states, your signature alone is sufficient.

Step 10: Store It and Tell Your Executor

Finally, you need to store your will safely and tell someone you trust about it and its location, because if no one knows it exists or where to find it, your executor and family cannot use it after you pass away. Make sure your executor knows they are named and understands their role, give them a copy of the will so they are familiar with your wishes, and clearly tell them where the original is stored. Your executor will need to file the original will with the probate court, so they must know exactly where it is and how to access it; do not hide it where it could be lost or overlooked.

Important Reality Check: A Will Does Not Avoid Probate

It is important to note that a will does not avoid probate—this is a common misunderstanding. With a will, you specify who receives your assets after you pass away, but the document still must go through a public court process where a judge approves it. This differs from a revocable trust, which avoids probate entirely. 

Many assets pass outside of your will anyway, such as retirement accounts, life insurance, bank accounts, or investment accounts with payable-on-death or beneficiary designations. Each has their own beneficiary designations—not within your will—which control who receives them, so make sure they are up to date. If you want to avoid probate altogether and include more detailed rules or contingencies, consider a trust-based estate plan, such as a revocable living trust.

If You Followed These Steps, You Now Have a Legally Valid Will

You now have a simple will in place that puts you ahead of most people. However, this is just a starting point, not the end. If you have substantial assets, real estate, a blended family, retirement accounts, or life insurance—and you want to avoid probate—you should consider getting a full estate plan with a revocable living trust done. 

 

If you want help getting this done, my law firm, KKOS Lawyers works with clients across the country, and you can book a call using the link below. We can go over the benefits of a full estate plan, the revocable living trust, power of attorney, and all the documents that help you leave your legacy behind.

Contact Us – KKOS Lawyers

 

The federal government is tightening its grip on real estate ownership disclosure — and if you plan to hold property in an LLC, your privacy may need to disclose the ownership and make filing to the federal government. Starting March 1, 2026, a new federal rule requires disclosure of who actually owns certain real estate in LLCs, giving regulators deeper visibility into ownership structures that many investors rely on for privacy and asset protection. Under this law, you must file a report with the federal government in any of the following situations:

• You transfer residential real estate from your personal name into your own LLC (or an LLC owned by anyone else).
• You purchase residential real estate in your LLC using cash and no licensed bank lender is involved.
• You acquire residential real estate using creative financing (such as seller-financed or “subject-to” transaction where no traditional bank mortgage is involved) and the property is held in your LLC.

If any of these situations apply to you, you are required to file this new report for each property that is transferred to or acquired in an LLC. 

 

What Is This Law Trying to Do?

This new requirement is part of the Corporate Transparency Act and is, frankly, a nuisance for ordinary real estate owners and investors. It stems from legislation Congress passed a few years ago, which also created beneficial ownership information (BOI) reporting for LLCs and corporations. While BOI reporting for many LLCs and corporations is no longer required as a result of treasury guidance saying it doesn’t apply to U.S. citizen owners,, this real estate reporting rule for LLCs remains in effect. Its stated purpose is to fight money laundering by making it clearer who actually owns and controls LLCs that hold real estate.

 

When Does This Law Apply?

Three criteria must be met for this law to apply. 

1. The property must be residential real estate. This includes a single-family home, condo, duplex, fourplex, or land intended to be developed for residential use. Commercial properties or apartment buildings with five or more units do not qualify.
2. The purchase must be made in your LLC without using a bank or mortgage lender. When banks or mortgage lenders are involved, they run your information through FinCEN (the Financial Crimes Enforcement Network), which satisfies the federal reporting requirement. However, if the property is purchased with cash, through seller-financed or “subject-to” arrangements, or with other forms of creative financing, there is no federal reporting in place—triggering the need for this disclosure report.
3. The transaction must involve a transfer to an entity, such as an LLC or corporation. For example, iIf you buy real estate in your own name and then transfer it to an LLC, this new report would be required.

 

If all three criteria are met, you must file this residential real estate report with FinCEN online at fincen.gov.

 

Exemptions to the Residential Real Estate Rule

 Using a trust to purchase or hold residential real estate can qualify for an exemption from the residential real estate reporting rule. If you establish a trust (as the settlor or grantor) and transfer property from your personal name into that trust, that transfer is exempt and no real estate report is required under this rule. This exemption was primarily created to negate the requirement of individuals transferring property they own to a trust they have set-up for themselves and their family. 

Some clients have asked whether they can buy residential real estate in a trust that is owned by an LLC (LLC is beneficiary to trust) to maintain privacy and avoid filing this new report. The idea is that, even though the LLC is the beneficiary, they hope the trust exemption will still protect them. At this time, there is limited guidance on this approach because the rule is new and FinCEN has not clearly addressed this specific structure. That said, if your primary goals are privacy with the federal government and potentially avoiding the reporting requirement, there may be strategies involving additional trusts and structuring options that leverage the trust exemption, though they typically come with added complexity and cost. Keep in mind though, much like your personal tax return, the federal real estate report that is filed is not available publicly and is not searchable by the public or available under a freedom of information act request. 

 

Who Has to File This Report?

The person responsible for filing the residential real estate report is determined by a reporting “cascade.” In simple terms, if a title or escrow company is involved in the transaction, that company is required to file the report. If no title or escrow company is involved, the responsibility shifts to the person or firm that prepares the deed.

At my law firm KKOS Lawyers, we prepare hundreds of deeds each month, transferring properties from our clients’ personal names into LLCs or trusts. When we prepare your deed, we also handle this real estate report on your behalf. If you are working with another law firm or service provider, you should expect them to prepare and file the report whenever they are transferring property into an LLC and the rule is triggered. If you prepare the deed yourself and do not use a title or escrow company then you are the one responsible for filing the report with FinCEN.

 

Why Is There Controversy Surrounding This New Report?

The real estate report requires you to disclose anyone who owns 25% or more of the LLC, as well as anyone who exercises control over the LLC, such as the manager. In other words, every individual with at least 25% ownership or significant decision-making authority must be reported to the federal government. Many clients prefer not to disclose ownership information to the government, the state, or in any public record because they value privacy. However, under this rule, you are required to report all individuals who meet the 25% ownership threshold or who have control of the LLC.

 

How to Fill Out the New Form, Step by Step!

You can find the Real Estate Report form that must be filed with FinCEN here: RER Form

In the first section, enter the name of the filer or the name of the trust, and select the appropriate filing type. The preparation date will be filled in automatically.

 

 

In Part I, you will first identify who is filing and completing the report. For example, if we at KKOS Lawyers were preparing it on your behalf, we would select ‘Deed Instrument Filer’ and enter our firm’s name.

 

 

In Part II, you will provide the property information. Enter the street address and the full legal description of the property, which you can find on your property deed.

 

 

In Part III, you will identify who is receiving the property. Start by completing the transferee section with your LLC’s information, then list all individuals who own 25% or more of the LLC.

If you are transferring property from your personal name into an LLC for real estate investing, and no money is actually changing hands, you can indicate that no consideration was paid. Next, enter the LLC’s legal name, address, and EIN. This section is focused on the entity that will own the property.

When you reach ‘Person(s) associated with the transferee,’ you must list everyone who owns at least 25% of the LLC, as well as anyone with significant decision-making authority. If you are completing the form for your own LLC, you would list yourself as a beneficial owner, indicate your citizenship, and provide your personal information. Unlike the BOI reports that never went into effect, this form does not require you to upload a copy of your government ID. If there is more than one beneficial owner or decision-maker, use the ‘+’ button to add each additional person and include all of their required details.

In Part IV, you will identify who is transferring (deeding) the property to the LLC. If you are moving property from your personal name into your LLC, enter your own information here. If the property is being received through any other method, list the details of the transferor accordingly.

 

 

In Part V, you will detail any payment information involved in the transaction. This includes the amount paid, the banks used, and the account numbers where the funds were transferred. For most clients transferring property from their personal name to their own LLC for asset protection—with no money changing hands—you can simply select ‘No Consideration Paid’ and skip the rest of this section.

​

The core requirements of this report are straightforward: disclosing the LLC’s owners, identifying the property, and specifying the transferor. That’s the key information being filed with the federal government.

 

Frequently Asked Questions

 

1. What if I’ve already transferred properties to my LLC before March 1, 2026? Do I need to file retroactively?

• No, this rule only applies to deed transfers and purchases occurring on or after March 1, 2026.

 

2. Where is this information stored, and can the public access it?

• The report contains private information, similar to your tax return. It is not publicly searchable, and even under the Freedom of Information Act, no one can request it from FinCEN. If other government agencies were to request it, they would have to obtain a subpoena first.

 

3. Do self-directed IRA owners need to file if purchasing residential real estate through an IRA or IRA LLC?

• If you acquire property directly in your IRA or through a custodial arrangement, no report is required. However, if an IRA LLC (or an LLC owned by your IRA) purchases residential real estate without a bank or mortgage lender involved, you must file the real estate report. If a title company, attorney, or deed preparer is handling the transaction, they will file it on your behalf.

 

While this new requirement adds an extra step to the process, compliance is still mandatory. Failure to file can result in civil penalties or even criminal charges. To stay compliant, engage the right professionals—like a title company, attorney, or deed preparer—who will file the report on your behalf, or complete it yourself if no such parties are involved. The goal is clear: enjoy the asset protection benefits of an LLC while ensuring this report is filed whenever you transfer residential real estate into one.

 

For those interested in creative strategies or leveraging the trust exemption, additional structuring may offer ways to navigate this requirement—though success depends on your state’s laws and your specific estate. Always consult a lawyer for advice tailored to your situation. If you’d like to connect with an attorney at KKOS Lawyers, click the link below—we’re here to help.

 

Contact Us – KKOS Lawyers

If I had to start over at zero—no assets, no investments, no portfolio—what’s the smartest path to building wealth again? The key is focusing on strategically building wealth that lasts. There’s no perfect investment or trendy shortcut. It starts with doing the right things, in the right order, and staying consistent. 

Step 1: Focus on Cash Flow

Cash flow gives you options—and options create freedom. The first step is to invest in your ability to earn. Learn a valuable skill and put it to work in the marketplace to generate income whether it is a career or a business. That income should cover your living expenses, pay down debt, fund your savings, and build capital for future investments. To expand your margin in cash flow, consider developing a high-value skill, growing a side hustle, or taking on temporary work to increase your earning potential.

 

When I was a new attorney in my 20’s, I worked as assistant corporate counsel for a large health care company. I was making a good income but had debt, a family, and was impatient with my financial situation so I took on a side hustle. I worked on nights and weekends putting up advertising signs on top of gas station pumps. This gave me extra income to get out of high interest debt and to actually have cash flow to start deploying into savings to buy a home and acquire an asset. For many people, your cash flow situation may require more education, training, a side hustle, a career progression or some other action and achievement that will make you more valuable in the workforce or in your business.

Step 2: Protect the Gap Between Income and Spending

To build true wealth, your lifestyle must grow slower than your income. One of the biggest financial mistakes is letting your lifestyle expand as fast as your income. When your spending rises in step with what you earn, there’s no cash left to invest. Without consistent investing, you’ll always work for your lifestyle instead of letting your money work for you. Wealth is built in the gap between what you earn and what you spend.Those who retire early do so by maintaining a wide margin—living below their means, saving, and strategically turning that capital into income-producing assets.

 

I had a friend who retired in his 40’s. He was a physician and when he told me he retired I was shocked. He was always financially savvy and invested into real estate with his excess cash flow but his trick wasn’t to just earn more, instead he told me he didn’t increase his lifestyle and spending in line with his income growth. He said his lifestyle and spending always lagged about 5 years behind his income growth and his income and spending gap was wide enough that he could set more and more money aside. In other words, if he was making $250K, he lived like he made $150k. Once he was making $500K, he lived like he made $250k. Do that for a year or two and you start making progress. Do that for 10 to 15 years, and you have significant wealth accumulation. 

Step 3: Get the Order of Operations Right

People don’t fail at investing because they pick bad investments—they fail because they don’t follow the right order. First, build an emergency savings fund. Second, pay off high-interest debt, such as credit cards with 20% rates. Lower-interest debt,  like low interest student loans or a mortgage, can wait, but your goal is for your investments to outperform your debt costs. If your debt carries a higher interest rate than your expected investment return, focus on paying it down first. 

 

For example, if you have credit card debt at 18% interest rates, you need to pay that debt down first before you start investing. It will be hard to find an investment that gets you a higher return than 18%. The only exception worth noting here is if you have a 401(k) at work where they offer a match. Many 401(k) plans offer a match of 50% to 100%. So for example, if you make $100K and you put in $3K to your 401(k), your employer puts in $3K and now you have a total of $6k but it only cost you $3K. That is a 100% return on investment on day one so even if you have high interest credit card debt it makes sense to at least put enough into your 401(k) if your employer offers a match of 100% or even 50%. After you’ve put in enough to your 401(k) to get the free money match, go back and focus on paying down high interest debt. 

Step 4: Start Investing Early, Even If It Is Boring

Once your financial foundation is set, begin investing—even small amounts make a difference. Early investing is less about picking the perfect strategy and more about building consistent habits, learning how markets work, compounding returns over time, becoming comfortable with risk, and letting time do the heavy lifting. Avoid chasing complex strategies or hot trends. If you’re new to investing, focus on steady contributions to simple, broad-based investments like an S&P 500 index fund, which can be a mutual fund or, an ETF, or a target-date fund. Don’t overanalyze every option—just get started and let your money grow. You can always adjust your investments later; for now, the goal is to build momentum and benefit from compounding.

Step 5: Layer in Tax-Advantaged Accounts Intentionally 

As your income grows, your financial strategy becomes increasingly important. Start by taking full advantage of the tax-advantaged accounts available to you. An employer-sponsored 401(k) is one of the most effective tools for growing wealth—especially if your company offers a matching contribution, which is essentially free money. A Roth IRA or Roth 401(k) allows your investments to grow tax-free and gives you flexibility in retirement withdrawals. A Health Savings Account (HSA) offers a unique triple benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

These accounts work together as powerful wealth-building tools that reward consistency, discipline, and time. By contributing regularly and letting compounding and tax advantages work in your favor, you can grow wealth efficiently and sustainably. And remember, your money isn’t completely locked away—options like a 401(k) participant loan provide some flexibility if you ever need access to funds. Invest with confidence, knowing you’re building a system that balances growth, efficiency, and accessibility.

Retirement accounts will grow and build wealth faster than standard brokerage or taxable account investments because retirement accounts are not taxed when you make money. This means that every penny of return gets re-invested and grow and when you think of investing over  a 20 or 30 year window of time the difference between making 10% on your investments and keeping 10% (versus say 8% in a taxable account) means your money doubles and compounds over time. 

 

When $100K turns into $1,600,000 from Investment Returns Only   Retirement accounts total return not affected by taxes, non-retirement accounts taxable so consider account value and growth only after tax is paid. $100K is an investment amount and growth is only from investment returns and not from making additional contributions or funds to invest.
$100k Investment Making 10% Annual Return	Roth IRA or Roth 401(k)	Taxable Account
10% Investment Return	$1.6M in 28.8 Years	X
8% Investment Return (same investment but because tax burden on investment income or gains being taxable total return is only 8%, example)	X	$1.6M in 36 Years

 

As the above example illustrates, saving in tax advantaged accounts like a Roth IRA or Roth 401(k) allows your wealth to accumulate faster which means you can reach your retirement goals faster. If you’re 40 with $100K to set aside you could end up with $1.6M by the time you’re 68 using a tax advantaged account or if you used a taxable account you could end up with $1.6M by the time you’re 76. Of course, investment returns and tax situations vary but in every instance funds invested in a Roth account that grows and comes out tax-free will beat funds invested from a taxable account. 

Step 6: Build Wealth Through Engines You Understand

Focus on investments you genuinely understand—those where you can clearly see how they generate returns, what factors influence their success, and what risks could affect them. The best investments aren’t necessarily the most complex ones; they’re the ones you can explain with confidence and conviction. If you can’t describe how your investment works or why it should succeed, it’s probably not the right place for your money. 

 

The goal is long-term asset accumulation—not frequent selling of appreciated assets. You want to own investments that work for you, generating cash flow and appreciating over time. That might be real estate, a business, or a stock portfolio—what matters is that you truly understand it and continue deepening your expertise. Concentrate your efforts where you have knowledge and conviction rather than spreading yourself thin across areas you don’t fully grasp. Wealth is created through focused conviction and concentration of what you know best and is preserved through thoughtful diversification to manage risk.

Step 7: Protect What You Build as It Grows

As your assets grow, your priorities evolve—protection becomes just as important as growth. Focus on building a solid foundation through proper legal and entity structures (e.g. an LLC for your rental property), adequate insurance, clean documentation, and full compliance. Protection doesn’t make you wealthier, but it prevents costly setbacks. A single lawsuit, poor partnership, or compliance mistake can erase years of progress.

This is also the stage where you begin to protect and strategically use your equity—whether it’s in your home, business, real estate, or investment portfolio. First, ensure your assets are well-protected. Then, learn how to access and leverage them to generate additional income or support your lifestyle without selling them outright. By using low-cost debt tied to strong assets, you can unlock capital for new investments or cash flow needs while your original assets continue to grow over time and this can all happen without selling the asset and causing capital gains tax. The alternative is selling the asset to receive the equity and then paying tax on the gains. By accessing equity in your asset via debt (e.g. cash out refinance of real estate or stock portfolio line of credit) you keep the asset and the future appreciation and also don’t have to pay tax on the gain from the sale because you still own the asset.

Step 8: Think Long-Term About Distribution

Think long-term and be intentional about where you’re heading. Take time to envision what your ideal financial future looks like—how much income you’ll need in retirement to sustain your lifestyle, how to structure your finances for tax efficiency, who are the beneficiaries to your wealth, and what kind of legacy or impact you hope to leave behind. These questions help you design a financial plan that aligns with your values, not just your numbers. You don’t need to have every detail mapped out from day one, but you should have a clear sense of direction. Wealth without purpose or planning eventually gets wasted. I keep a 10 year plan and update multiple times over the year. I think back in 5 years and then in 3 and 1 year phases. I make goals and stick to them. We underestimate what we can accomplish in 10 years and by taking the time to think through what your goals can be in 10 years you have more clarity about what you should be doing in 5 years, 3 years, and this year.  

The Big Picture: Consistency Beats Cleverness

Wealth is built through consistency, not luck. Success comes from steady habits, patience, and discipline—not quick wins or trends. Building wealth from scratch isn’t about chasing the perfect investment; it’s about following a sound plan, taking deliberate steps in the right order, and staying the course long enough for your efforts to produce lasting results.

 

If you’d like to learn more, I’ve created a guide called The Ideal Order of Investing, available through the link below. In it, I break down the key steps to take in the right sequence—helping you focus on what matters most right now and what to prioritize next in your wealth-building journey.

Building Wealth Guide: The Ideal Order of Investing | Mat Sorensen

 

 

Disclaimer

This article is for educational purposes only and does not constitute legal, tax, or investment advice. Tax results depend on individual circumstances, future legislation, and proper implementation. Consult qualified advisors before implementing any strategy. Investment outcomes depend on investment performance, contribution discipline, future tax law, and proper execution. No specific result is guaranteed.

Trump Accounts are a newly created type of tax-advantaged retirement account for children under age 18. Established under the One Big Beautiful Bill Act and codified in Internal Revenue Code §530A, these accounts introduce a planning opportunity that did not previously exist in retirement law. The most significant planning opportunity around Trump Accounts is not to keep the account as a Trump Account or as a Traditional IRA, as the Trump Account automatically turns into at age 18, but to convert that Trump Account to a Roth IRA. 

On the surface, Trump Accounts appear limited. But with simple planning, Trump Accounts are the most powerful account you can establish for your kids. Why? Because they are flexible and at age 18 can be converted to a Roth IRA, which is widely regarded as the best tax-advantaged account any American can own. 

You can contribute up to $5,000 per year per child to a Trump Account, and these contributions are made with after-tax dollars and do not generate a tax deduction for the contributor or the child. While funds inside the account grow tax-deferred, the account ultimately converts to a traditional IRA when the child reaches age 18. At that point, distributions are taxable, and early withdrawals before age 59½ are generally subject to penalties. The account functions like a traditional IRA, and turns into one at age 18, but you don’t get a tax deduction on the contributions.

In that sense, early Trump Account analysis focused on what seemed like the least favorable aspects of both traditional and Roth IRAs: no deduction on the way in (Roth IRA downside), and taxation on the way out (Traditional IRA downside). As a result, much of the early commentary emphasized the novelty of the account rather than its long-term planning potential. The ability to convert the Trump Account to a Roth transforms Trump Accounts from a simple savings vehicle into a powerful early-stage Roth planning tool, even when the child does not have earned income.

What Is a Trump Account?

A Trump Account is a statutorily created retirement account that is treated as a traditional IRA once the beneficiary reaches age 18. The account must be designated as a Trump Account at the time it is established and is governed by IRC §530A.

Important characteristics:

• Maximum contribution limit of $5,000 from individual contributors
• Contributions do not require earned income
• Contributions are not tax-deductible
• Distributions are taxable
• At age 18, the account follows Traditional IRA rules and turns into a Traditional IRA

To understand where Trump Accounts fit into a broader retirement strategy, it helps to compare them directly to Traditional and Roth IRAs. While all three accounts offer tax-advantaged growth, they differ significantly in contribution limits, earned income requirements, funding deadlines, and how distributions are ultimately taxed.

 

	Trump Account	Traditional IRA	Roth IRA
Contribution Amt	$5,000	$7,500	$7,500
Earned Income Req	No	Yes	Yes
Contribution Deadline	12/31/2026 (last day of the year)	4/15/2027 (tax return deadline)	4/15/2027 (tax return deadline)
Tax Deduction for Contribution	No	Yes	No
No Tax on Investment Growth	Yes	Yes	Yes
Distributions Taxed	Yes, except basis (Amounts contributed)  is exempt	Yes	No

 

Why Trump Accounts Matter

No Earned Income Requirement

Unlike Traditional or Roth IRAs, Trump Accounts allow contributions even when the child has no earned income. This makes it possible to begin retirement saving earlier than previously allowed under tax law.

Early Access to Roth Conversion Planning

Once the child reaches age 18, the account automatically becomes a Traditional IRA, and the account becomes eligible for Roth conversions. This creates a legal pathway into a Roth IRA that does not rely on earned income contributions.

The Growth Period: Rules Before Age 18

The Trump Account operates under a defined “growth period,” which ends on January 1 of the calendar year in which the beneficiary turns 18. During this period, special rules apply.

Contributions During the Growth Period

The first year for Trump Accounts is 2026, and in that year, contributions cannot be made before July 4, 2026, and must be made by December 31 of the applicable calendar year. Unlike IRAs, you cannot make prior-year contributions up to the tax return deadline. 

Qualified contribution types include:

• Pilot program contributions funded by the U.S. Treasury (This is the $1K free contribution from the U.S. government for any U.S. child born between 2025-2028)

   

• Qualified general contributions from states or qualifying charities (For example, the amounts donated by Michael and Susan Dell donated to children in lower-income zip codes).

   

• Employer contributions under IRC §128 up to $2,500 (Many U.S. Employers have already pledged to contribute to their employee children accounts including Blackrock, Visa, and these employer contributions are not taxable to the employee or child).

   

• Qualified rollovers between Trump Accounts

   

• Standard contributions made by family members or other third parties (this is the $5,000 annual contribution a parent, grandparent or other person can make).

   

Standard contributions combined with employer contributions are subject to a $5,000 annual limit, indexed for inflation after 2027. Employer contributions are separately capped at $2,500 per year.

Investment Restrictions During the Growth Period (age 0-17)

Investment options during the growth period are limited and Trump Accounts cannot be invested into a single stock nor can they be self-directed into real estate, crypto, or private companies like many self-directed IRA clients do at Directed IRA. 

During the growth period (age 0-17), Trump Account assets may be invested only in eligible mutual funds or ETFs that:

• Track qualifying U.S. equity indexes

   

• Do not use leverage

   

• Have total annual fees of 0.10% or less

   

Cash and money market funds are not permitted investments, except for brief administrative holding necessary to process contributions, dividends, or sales before reinvestment.

Distribution Restrictions

Distributions are generally prohibited during the growth period. Limited exceptions include:

• Trustee-to-Trustee rollovers between Trump Accounts (e.g. moving your Trump Account from one custodian provider to another).

   

• Qualified ABLE rollovers during the year the child turns 17

   

• Distribution of excess contributions

   

• Distribution upon the death of the beneficiary

   

Hardship distributions are not permitted.

The Transition at Age 18

On January 1 of the year the beneficiary turns 18, the growth period ends. At that point:

• Contributions must stop
• The account becomes subject to Traditional IRA rules under IRC §408

• Distributions, rollovers, and Roth conversions are permitted

IRS Notice 2025-68 explicitly confirms this transition.

Everything that follows hinges on one planning opportunity: Roth conversions after age 18.

Roth Conversions: The Core Planning Opportunity

The year the child reaches age 18, the Trump Account turns into a Traditional IRA and all Traditional IRA rules apply. This is significant in two instances. First, you can convert the Traditional IRA into a Roth IRA. And second, you now have more investment options on how to invest the Roth IRA (that first started as a Trump Account) as Roth IRAs can be self-directed and invested into any assets allowed by law including a single stock, real estate, private companies, small businesses, rental properties, and even crypto. 

The Roth conversion strategy is central to the importance of Trump Accounts as it allows the nest egg that has been set aside while the child was age 0-17 to move from a tax-deferred traditional IRA to a tax-free Roth account. And, if we strategic about how we convert the Traditional IRA (formerly a Trump Account) when the child reaches age 18 there will be no tax on the Roth conversion. 

How the Strategy Works:

1. Fund Early
   Trump Accounts allow funding years before earned income exists, extending the compounding timeline.

    

2. Traditional IRA Treatment After Age 18
   At age 18, the account will consist of two buckets of funds

    

• After-tax basis from standard contributions (e.g. you put money in and didn’t take a deduction as that is the Trump Account rules so these funds are after-tax dollars). This is sometimes referred to as “Basis” under the rules.

   

• Pre-tax earnings from investment growth (e.g. the contributions were invested and grew and the earnings have not been taxed). 

The distinction here between after-tax and pre-tax funds is important as you only pay tax on the Roth conversion for pre-tax dollars. In other words, when you convert the Trump Account from a Traditional IRA to a Roth IRA you do not pay tax on the contributions you put into the Trump Account. You are only taxed on the pre-tax earnings and investment growth that came from the contributions.

 Pro-Rata Rule and Basis Allocation

Once a Trump Account turns into a Traditional IRA the pro-rata rule for Roth conversions applies. What the means is that you have to determine what amounts you contributed after tax (which you won’t pay tax on) and what funds are the earnings and the growth in the account which have not been taxed but will be when you do a Roth conversion.  

Example:

• $60,000 – Your contributions to the Trump Account over 12 years in the amount of $5,000 each year (no deduction allowed and taken). This is after tax dollars and also sometimes called basis.

   

• $40,000 – The earnings and growth as the contributions were invested over that 12 years which have not been taxed and are called pre-tax dollars.

   

• $100,000 – Total Account Value after 12 Years of investing 

In this scenario, 40% of any conversion is taxable, and 60% is non-taxable. So, if I wanted to convert $50,000 to a Roth IRA I would only have tax on 40% of the conversion which would be $20,000. The other $30,000 would not be subject to tax. 

How to Convert  Trump Account to Roth and Pay Zero Tax

When your child reaches age 18 you are able to convert their Trump Account to a Roth IRA and age 18, 19, and 20 are optimal years to convert your child’s Trump Account to a Roth IRA. When you convert Trump Accounts, which turn into Traditional IRAs at age 18, to Roth IRAs the child who owns the account takes the amount converted into their taxable income. This is one of the downsides of Roth Conversions. However, when a child is age 18 they may be finishing high school and they may have no other taxable income so if the taxable portion of the Roth conversion is under the standard deduction ($16,100 in 2026) they will pay no tax on the amounts converted as they will be in a zero federal income tax bracket. And if your child has a large Trump Account at age 18, you could also do multiple Roth conversions over different tax years so that they stay under the standard deduction each year and are able to get all their Trump Account funds over to a Roth IRA. This could be when they are 18, 19, or even in their 20’s if they are in low or no income years. And even if they do have a job, they will likely be at the lowest tax rate of their working years and converting the funds now will pay huge dividends later as the funds in the Roth IRA grow and come out tax-free later in retirement. 

Special Rule: No Aggregation With Other IRAs

A critical clarification in Notice 2025-68 is that Trump Accounts are not aggregated with other IRAs for basis allocation purposes.

This means:

• Trump Account basis is calculated separately

   

• Other Traditional IRAs do not affect conversion taxation

   

• Existing IRA balances do not dilute the strategy

   

This is a rare and favorable exception in retirement tax law.

Long-Term Impact

Once assets are held in a Roth IRA, future qualified distributions at age 59 ½ are tax-free. The difference between executing this correctly and not can be measured not just in tax savings, but in the financial flexibility available to your child decades later.

To understand why this strategy matters, it helps to zoom out.

Assume a child reaches age 18 with $100,000 in a Trump Account that has been fully converted to a Roth IRA using the strategy described above. No additional contributions are ever made by the child and they simply keep the $100,000 invested.  

If that $100,000 remains invested for 45 years and earns a 10% annual return (e.g. an S&P 500 index fund), it will grow to approximately $8.8 million by age 65.This is the value of compounding and is what we wished our parents or grandparents did for us. 

One key strategy here though is the Roth conversion and ability to receive all of the compounding and investment gains entirely tax free. Remember, the Trump Account will turn into a Traditional IRA at age 18 and if it is not converted and stays invested it will be worth $8.8M as well but millions will go to the IRS and to the state (as applicable) when distributions are made from the Traditional IRA later on.

 

Disclaimer

This article is for educational purposes only and does not constitute legal, tax, or investment advice. Tax results depend on individual circumstances, future legislation, and proper implementation. Consult qualified advisors before implementing any strategy. Investment outcomes depend on investment performance, contribution discipline, future tax law, and proper execution. No specific result is guaranteed.