If you’re looking to grow long-term, tax-deferred or tax-free assets, putting your IRA funds into a “self-directed” IRA can prove to be a wonderful idea for many people. As taxes continue to rise for many Americans, retirement investment options which allow for tax-deferral can earn a decent rate of return.
Therefore if the possibility of using your IRA to purchase investment properties seems like a worthy idea, there are a few things to take into consideration.
ELIGIBLE PROPERTIES
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In order to use your IRA to buy a property, there are several rules which need to be considered.
1.) Your purchase must be a business property, instead of a personal residence, second home, or an occasional rental. Additionally, an IRA cannot be used to buy a property which you already own.
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2.) If you are actually looking to purchase a rental property, you must first open an IRA custodial account before transferring cash from an existing IRA or 401(k).
3.) If you’re in the house-flipping business, you can still participate in the buying and selling of real estate, as long as you stay within set yearly limits.
4.) Using a self-directed ROTH may offer the best returns since your earnings will grow tax-free.
CONSULT YOUR TAX PROFESSIONAL
In the end, if you’re considering using your IRA to buy into the real estate market, make sure you understand what can and cannot be done. Always consult your tax advisor to ensure you’re following IRS regulations so that all punishable penalties will be avoided.
Using a self-directed IRA or self-directed ROTH can be a sound investment alternative that truly is worth considering, so when you’re ready to explore the real estate opportunities, I’d be happy to assist you. Feel free to call at 678-778-6551.
