I know an IRA can be used to purchase real estate, but can I combine IRA funds with non-IRA funds to buy a single property? I.e. I would see it as a partnership from a tax perspective, with IRA owning a portion, and myself owning the rest. Would be for an investment property, not personal use.
While it is technically possible in some circumstances to structure such a transaction, in most cases it would be considered "prohibited transaction" in the eyes of IRS, or likely to lead to a prohibited transaction in the future. All transactions involving your IRA must be "arms length" so if you want to sleep at night make sure that you nor any other "disqualified person" is involved in the transition with your IRA.
While it is technically possible in some circumstances to structure such a transaction, in most cases it would be considered "prohibited transaction" in the eyes of IRS, or likely to lead to a prohibited transaction in the future. All transactions involving your IRA must be "arms length" so if you want to sleep at night make sure that you nor any other "disqualified person" is involved in the transition with your IRA.
Agree on probly being more trouble and risk than it's worth. I think if I make any RE investment with IRA funds it will be as an LP instead of direct RE
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
3y
Yes. Preferably something that’s supposed to bring in income, not appreciate. You don’t want to turn 15% capital gains tax in to max tax rate income. Save appreciation for your regular non-ira funds. The funds you should never have to pay any taxes on. (Exchange and hold and hold and exchange until you die…)
Yes. Preferably something that’s supposed to bring in income, not appreciate. You don’t want to turn 15% capital gains tax in to max tax rate income. Save appreciation for your regular non-ira funds. The funds you should never have to pay any taxes on. (Exchange and hold and hold and exchange until you die…)
Not 100% sure I follow. are you saying OK to buy a high income generating, low appreciating property with the use of combined Roth IRA/non-IRA funds? and then what about exiting in the future - wouldn't it just be capital gains tax upon sale (or none if I 1031)?
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
3y
I wouldn't buy any real estate in a retirement account. Real estate is already a tax advantaged investment. BUT, if you insist. You don't want appreciation (something that should be taxed at 15%) to be taxed as regular income. (Which it would if it was in an IRA, resulting in a 50-100% increase in taxes.)
I wouldn't buy any real estate in a retirement account. Real estate is already a tax advantaged investment. BUT, if you insist. You don't want appreciation (something that should be taxed at 15%) to be taxed as regular income. (Which it would if it was in an IRA, resulting in a 50-100% increase in taxes.)
Ahh, but it's a Roth IRA. My understanding is the ordinary income tax on self-directed IRA's only applies to traditional IRAs.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
3y
@Account Closed
I agree they don’t pay capital gains. They pay 100% regular income tax when withdrawn which is higher, often twice as high. That income is also added to your regular income pushing you in to an even higher tax rate than you would be which capital gains do not. So few people really understand that.