Hi, if a property is purchased thru a self directed IRA, how are the tax and renovation costs deducted from annual taxes, or when will the tax advantage of holding the property be realized?Any rents are deposited into the IRA and any expenses are paid thru the IRA with before tax dollars so, hmmmm ! I think I just answered my own question. Thanks for being there, Mike. :help
IRA doesn’t file a tax return. You pay taxes on your distributions from a traditional IRA and there is no tax due with SD Roth IRAs. Your custodian will love you. They get to charge you a fee every time they handle a piece of paper.
Thanks BLL, I know that I will have an annual fee for administration costs and that is defined, they will handle paying taxes and other maintenance costs thru the IRA.
Is there a better way to buy RE with IRA money that I am missing? I tried to explore all my options before doing the SDIRA and it seemed to be the most effective and profitable. I moved money from a 401K to the IRA because of the limitations on investments in the 401K.
It isn’t the annual fee that is the problem. It’s the fee for processing paperwork when they have to cut a check. Do you really want to pay the custodian every time you need to pay someone?
Most people just set up an LLC with the IRA as the member and themselves as a manager. You can do what you want subject to IRA rules without talking to the custodian. You can write a check same day to close. You pay vendors whenever you want. You don’t have to wait for the custodian to process your paperwork or wait for business hours to get something done.
Hi BLL, that is interesting. Where can I find info on the rules for the IRA as a member concerns ? Are all institutions equipped with the same rules for IRA settup as a member or do they vary from State to State ? So are you saying that you would pay expenses from your personal account and then request reimbursement from the IRA to replace your out of pocket funds ? Yeah, I need to read the rules for this scenario. Thanks loads !!! Mike
Go to irs.gov and look for prohibitted transactions, unrelated business taxable income, and disqualified individuals. The rules are the same for all IRAs, even the ones from financial services firms. Schwab, Fidelity, etc. restrict your investment choices. The SD IRA custodians don’t and take no action to determine whether or not your investment complies with tax law. That is your responsibility. They make money on the various fees they charge. The others make money on commissions and mutual fund fees.
You set the LLC up yourself and instruct the IRA custodian to invest in it. Your LLC needs to comply with state law and the IRS rules for IRAs. You need to have a professional set it up for you if you don’t know what you are doing.
Absolutely, not. That is a big no no. You pay everything from the LLC checking account and deposit everything into the LLC checking account. Your personal funds never fund the LLC and you never take anything out of the LLC. You get paid when you take money out of the IRA.
Hey, this is good stuff ! ! I think I must have asked the right questions because I got a ton of info. This is a great forum ! Keep up the fantastic work.
Thanks BLL, I intend to do allot more checking on this subject so as to save more profit for myself and build retirement funds quicker. You have been very helpful ! I look to converse with you again in the near future. Mike