All Forum Posts by: Carl Fischer

@Mary Jay

The contribution would be considered an “excess” contribution which would be taxed at 6% each year until it was withdrawn.

Your cpa should be able to give you your MAGI. You can take your contribution out before you file your return. @Aaron K. has the right approach -know ahead of time. 
Yes you can make a contribution to a traditional Ira and then convert it to a Roth. In the vernacular it is known as a "Backdoor" Roth IRA. As @Mark S.suggested.  

@Mary Jay
If the rates stay as they are today simply put those numbers in as your tax return today and get your answer. 
Today’s tax rates are scheduled to sunset and go up in 2025 so you have to make some assumptions for years out. Are taxes going up, down or staying the same. 
Will you be receiving Social Security and medicare? If so, That also will affect your income and taxes. 

@Maximo Jacobo
I know you are looking for something short term so you can pull your funds out and invest in real estate when you have a better pulse on what is happening in the real estate market. In my experience, I think it would be wise to consider contributing to something long-term, like a retirement account. 

Many investors are finding that a Roth IRA can a great wealth-building tool, especially now as some folks are in a lower tax bracket this year than they would normally be in. I do not know your financial situation, but you could talk to your accountant to see if it would be a good year for you to start a Roth IRA.

One thing to consider is an account that is self-directed. This account type will allow you to invest in many different things such as buying real estate or investing in a business, and puts you in a position to be in control of your retirement investments. You can invest in things you know, such as real estate, through your IRA in order to build your wealth and diversify your portfolio. Many investors have found success with self-direction, and have invested in real estate assets ranging from commercial real estate, to residential real estate, and even raw and improved land. I would be happy to connect if you have any further questions.

Hi @Adam Pakes. Many investors have found success through investing in alternative assets with their self-directed IRA, including in real estate. I have been investing in real estate with my self-directed IRA and Roth IRA for years, and I have found it to be a very beneficial way to diversify and grow my retirement accounts. You can purchase residential real estate, commercial real estate, and even raw or improved land in your IRA, and that's just naming a few. Any rental income and profits from the sale of that property would then be able to flow back into your IRA tax-free in your Roth or tax-deferred with your Traditional. By investing through a self-directed IRA, you are able to use your own unique knowledge and expertise to control your financial future. And of course, the more the merrier. Diversification is just as important in your retirement portfolio as it is in your personal portfolio. Be sure to do your proper due diligence on your investments. Lots of investors start self-directing in what they know and are comfortable with; this helps ensure that you are following IRS guidelines and avoiding future penalties on your IRA. If you have any additional questions, I would be happy to connect.

@Steve K.

Yes I’ve heard about PTEs.They are expensive and time consuming.

Do a transfer from another Ira.

@Sean Floyd-bethune
As@Moises R Cosme explains account for the expense in the selling documents. It happens all the time-not a big issue. 

@Bryan Mitchell

My IRAs have bought real estate and used non recourse loans, bought 1st and 2nd lien position notes, bought options on real estate, generated notes and mortgages, sold real estate and taken back a mortgage, converted real estate in a traditional account to a Roth -just to name a few things. My Ira has also foreclosed on real estate and sold it after it was rehabbed. My Ira has partnered with other IRAs and individuals and bought into real estate private placements and syndications and purchased tax liens. My wife’s Ira wholesaled a purchase and sale contract.

I hope this gives you a few ideas on how to make tax free income for the rest of your life.

@Steve K.

The summary by @Brian Eastman was spot on. You will pay a 6% tax on the excess contribution every year it remains in the account. Let’s say you needed $13k of excess contribution. The first year you would pay .06 x 13,000 =780. Year 2 you could take a 6500 contribution from the excess making your tax .06 x 6500 = $390. You would then make the 6500 contribution and the excess contribution would be done. There is an irs form that you and your cpa would file tracking the money. 
if you ended up with the house you could finance it and pay off the excess in the year you made it. Or you could use the rent money to correct the over funding. 
The Ira could also borrow money using the note as collateral. 
@John Underwood makes a good point about having reserves. 
That said most foreclosures, with correct mortgage paperwork, can be foreclosed on for less than a years contribution limit. 

As you can see you have multiple options but the one I like best is to make good loans so foreclosure does not become an option. However if you do enough loans you will end up with a foreclosure

Hello @Ulrick Edmonds. @Joshua Ferrari lays out some excellent groundwork for your investing capabilities through self-directed IRAs, and I'd like to expand on it. The deal you're describing is a relatively simple process, but you'll want to make sure that you have changed the contract name over to your SDIRA's name (not in your personal name) if you want to conduct the transaction within your IRA. If you plan on flipping the property your IRA, it may incur some taxes. Look into Unrelated Business Income Tax for more information on this. The form to file taxes for an IRA is Form 990-T.

The value of a property owned by an SDIRA is not all that much different than one owned by any other entity, you're just not being taxed on the income it generates. As for attaining that value back you could sell it, lease it, or so forth. If you are looking for more liquid forms of investing, why not lend on Real Estate rather than buying? By lending 50k on a 100k property, you're not tied up with any liability and if the borrower defaults, you get a 100k property in your IRA for half the price. There are plenty of ways to offload a note on the secondary-note market, selling real estate is just how it always has been. I would be happy to connect if you have any additional questions on ways you can fund deals with an SDIRA. 

@Bill Hampton great explanation and alternate thought.