Investor · Atlanta, GA · Member since 2016 · 112 posts · 25 votes
I'm getting ready to retire in Jan 2022. I have a rental home that is in my SDIRA LLC. I want to transfer the deed into my name at retirement. What kind of taxes would i be responsible for if I am unemployed??
If you don't plan to live in it, it may be best to leave it in the SDIRA. I have been mulling over a similar situation but have a few years until RMDs start. If you keep the investment in your SDIRA, any impact to your heirs? I haven't seen anything about inheriting a checkbook LLC. And who knows we might all be undoing them in a few years if the laws change. Ugh.
If you have that house in a Roth, that's awesome and congrats!! If it's not in a Roth, it will be taxable as a traditional IRA distribution as if it were cash at your personal tax rate. And of course on either IRA type you'll have the appraisal and fees to your SDIRA custodian to liquidate the account, do the in kind distribution, and record the new deed. Best wishes!
Glenna, unfortunately, I only have 20% in the Roth, the rest is in a traditional. So, I'll have to pay taxes on that portion. And of course, the custodian will get their money! I'm just wondering if it would be better to keep the house in the LLC, and just take distributions instead???
If you don't plan to live in it, it may be best to leave it in the SDIRA. I have been mulling over a similar situation but have a few years until RMDs start. If you keep the investment in your SDIRA, any impact to your heirs? I haven't seen anything about inheriting a checkbook LLC. And who knows we might all be undoing them in a few years if the laws change. Ugh.
I won't be living in it so I might just keep it as is. The only downside to keeping it in the LLC is that I can't write off any expenses, which there are many. I guess I just need to weigh my options and go from there. Good question about inheritance. I listed my beneficiary with the custodian, so I'm assuming that covers the checkbook LLC?? Something I def need to inquire about. :)
@Robin C., I hear what you are saying about 'getting the write offs', but there are a few different ways of looking at that.
Lets say you have a paid-off property worth 200K and not other funds in that account(s). It brings in 20K per year, and you have 5K of expenses - taxes, maintenance etc..., so you 'net' 15K. So even though you 'took in' 20K, you also paid those expenses OUT of that same account, leaving you with 15K. If you take that 15K out as a distribution, you are in essence NOT 'paying tax' on that 5K of expenses. Still 'writing it off, just different terms and timing :-)
Looking into the effects on inheritance is definitely a good idea. One place I would recommend is Mark J Kohler's youtube channel or website. He is both a lawyer and CPA, and has TONS of good content and books focusing on small businesses with a heavy emphasis on real estate also.
The big downside to leaving it in the SDIRA is the downside you’re already facing. You’ve turned your appreciation from capital gains in to regular income taxed at a much higher rate. Plus it’s much harder to take out RMD’s if your only holding is the house. If you’re pretty sure tax rates will be higher in the future today may be as good a day as any to take it out, pay the taxes and then maybe do a cash out refi if you want the money for something else.