Buy Real Estate and Pay No Tax on the Gain??? Convert to Roth

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Education & Training with uDirect IRA Services, LLC
Pre-tax or after-tax? That is the question? I'm not a tax professional (I'm a Third Party Administrator for self-directed IRAs). So, check with a tax professional to verify... with that disclaimer out of the way I'll say that income taxes are on sale next year. I mean a red hot fire sale! In 2010 there's something called TIPRA, the Tax Increase Prevention and Reconciliation Act. So why should you care? With TIPRA you can CONVERT pre-tax IRA money to Roth money REGARDLESS OF INCOME. Note I say "convert" and not "contribute". The income limits still apply for contributing to a Roth IRA, but you can convert to Roth no matter how much you earn. That's great by itself but the feds are giving us another perk here. When you convert pre-tax to after-tax retirement money you have to pay the tax on the conversion. The perk comes in 2010, because of TIPRA. You can split that tax consequence over 2 years. Basically it works like this. January 1, 2010 you convert your Traditional IRA to a Roth. You don't have to write a check for 50% of that conversion until April 15, 2012! The second half would be due April 15, 2013. Conventional wisdom would say pay taxes now while they're low. You & your CPA can determine what's right for you. You can self-direct most retirement accounts and use these dollars to buy real estate (or basically anything except life insurance or collectibles) IRS Pub 590. That's what I do, I provide self-directed IRAs so people can take control of their retirement dollars and invest where they like. www.uDirectIRA.com
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Rainmaker
506,855
Drick Ward Property Management / Broker Assoc
NEPTUNE REALTY - Virginia Beach, VA
"RealtorDrick" - Experienced Representation

Fantastic post - thanks for sharing. More good news... Once you've got real estate in your retirement portfolio, don't forget about 1031 exchanges as time goes on and you need to adjust your positions (sell one house, use the proceeds to buy 2 more and defer tax on the gain.) Check with your tax advisor to consider suitability for your situation and any limitations that may apply.

Nov 03, 2009 11:08 PM #1
Rainer
67,073
Alexandria Virginia
Featuring Susan Craft, CRS, REALTORĀ® - McEnearney Associates - Alexandria, VA
Real Estate Editor

Great post.  I do think the IRA real estate is limited to homes not for personal use though.

Nov 03, 2009 11:19 PM #2
Rainer
23,234
Kaaren Hall
uDirect IRA Services, LLC - Irvine, CA
You can invest in real estate using your IRA!

That's right - self-directed IRA investing is for "investment purposes only" and therefore can be used for non-owner-occupied, investment properties

Nov 04, 2009 12:34 AM #3
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Rainer
23,234

Kaaren Hall

You can invest in real estate using your IRA!
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