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Pay Your Kids and Open an IRA

By Niman Singh

Services for Real Estate Pros with SimplifyEm

April 14, 2008 05:43 AM

I hope you're all done with your taxes... if not, do you really have time to read this???

Well, for whatever reason, you might be interested, so here's another tax tip I'd like to share.

Here's a bright idea:

Pay your kids to do some of your work (like on properties you own), and put the money in IRA accounts for them.

This is especially a good idea if you’ve already maxed out on your and your spouse’s IRA contribution for the year.

So if you’re at a high tax bracket the end of the year, hire your kids to do some work, like landscaping your rentals.

You’re better off avoiding the taxes on your extra income, and the money will be safe in a tax free shelter... And it’s a good way to help your kid prepare for their first property purchase.

This is a complex strategy, and I have put into simple terms. If you think about it a little, you may find a few twists and turns you can make to benefit your specific situation. To learn more about all the different ways to save money on real estate investments, visit our sites.

Niman Singh

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Konnie Mac McCarthy

MacNificent Properties, LLC - Cobb Island, MD

Broker/Owner - VA & MD "Time To Get A Move On!"

I love it...what a great idea....

Apr 14, 2008 06:14 AM

SimplifyEm - Fremont, CA

Property Management Software

Thank you Konnie, I do think it is a great idea!

I've even seen agents do this with homes that they are staging.

Rather than staging the house and billing the buyer and increasing your own income - you can get your kids involved, have them do some of the grunt work, and then they get to bill the seller. It's a great way to save money. In effect, you can use your kids as an extension to your own IRA deduction.

I've done this myself pretty often with property that I've sold. It's been pretty useful, and my kids will be thankful when I let them use their IRAs to purchase their first properties (although they complain about not being able to use the money now)!

Apr 14, 2008 06:29 AM

Pamela STETSON

Berkshire Hathaway HomeServices Abbott Realtors - Mahwah, NJ

I would love to help you buy or sell your home!

This is a terrific idea --- I will share with others in my office. By the way, love your graphics, too.

Apr 16, 2008 05:59 AM

Pamela, feel free to share. Also, remember that there are many more tips similar to this at RealTaxTips.com and they are all specific to real estate investors and professionals.

Thanks for the comment about my graphics. Right before I post a blog, I try to find a few images that match some keywords in my blog - it's much better than just having text.

About the flashing banner at the bottom - I don't know how that thing works.... Thank God for my designers!

Apr 16, 2008 06:20 AM

* Rate A Home

Rate A Home - Saugatuck, MI

Niman, I learned of this when both of the kids had already reached 18. My CPA never gave me a heads up, glad you shared with others.

Apr 17, 2008 01:09 AM

Clint Miller

Real Estate Pipeline, Inc. - Missoula, MT

I purchased my children FLex Universal Life insurance when they were born. My 4 yr old now has almost $5,000 in additional cash he can use when he goes to college, or whatever. Its a good way to protect you and them.

Apr 17, 2008 01:10 AM

Clint, you're doing a great thing for your kids.

One thing that I like to tell my kids is "It's not how much you make, it's how much you save"

I have taught them to put aside 10% of all the money they ever make.

If you think about it, 10% per paycheck is not a huge amount... but they've been saving 10% from every paycheck they've ever received.

All the money sits in a nice little bank account, and is making interest.

When they were little, they didn't really like the idea of me putting away 10% of their money... but after their first property purchases, now they don't have any complaints!

Apr 21, 2008 08:39 AM

Renee Coakley

Solid Source Realty GA - Snellville, GA

Thanks for the tip

Apr 22, 2008 09:49 AM

Renee, I'm happy to share! Be sure to check out the other tips at RealTaxTips.com!

Jul 04, 2008 08:25 AM

Pay Your Kids and Open an IRA

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