Updated over 8 years ago on . Most recent reply
Using 401K/IRA to Purchase Property
Does anyone have any insight on how 401k and/or an IRA can be used to purchase property? Pros/Cons? Any way to avoiding early withdrawal penalties?
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Dmitriy Fomichenko
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Dmitriy Fomichenko
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@Eric Neal, you are correct, when you buy investment property with an IRA there is no depreciation deduction. Since the income belongs to an IRA it's not taxable so there is no income to use the depreciation to offset against. Also keep in mind that with an IRA you have to use non-recourse financing, conventional financing is not allowed because as disqualified person you are not allowed to provide personal guarantee.
And on a side note you should never factor in depreciation to decide if this is a good investment. Depreciation is a bonus.