Now if you experienced a capital gain of $ 100,000 on a property purchased with conventional funds, you would end up paying 15 % of the total gain you realized. That would be $ 15,000 on a gain of $ 100,000. That’ s 5 times higher than the tax you’ d pay if the property is owned by the IRA, you see the math! There would not be any deduction for the percentage of ownership by an IRA. You bought it with conventional funds so you pay whatever the tax rate is. The gains are even more exponentially greater if you own the property in a Roth IRA where you don’ t have any taxable requirements!
If you go back to the beginning of this article you can now better understand why, in the long term, it makes greater sense to invest your IRA in real estate if you have the necessary capital for the down payment, versus investing with conventional funds that don’ t provide any tax relief despite the higher down payment requirements and / or the higher interest rates. Moreover, you are still able to deduct expenses with the IRA owned property which makes the gains less, and in turn, reduces the tax to be paid.
Of course, there are no guarantees when it comes to investing. One can lose money in real estate just as they do in the stock market or other investment vehicles, but real estate doesn’ t disappear like stocks for example and, if nothing else, it can be used to create income by renting it out which cannot be done with stocks or bonds. However, that’ s not what with this article is about or was meant to discuss. Every investment has its advantages and disadvantages. This article was meant simply to provide you, the investor, with the knowledge to invest wisely in real estate. Using one’ s IRA to do so is an excellent option especially when you consider the way the gains are treated by the IRS tax code.
As you can surmise from what has been discussed here, the general formula for understanding how the IRS treats the gains from IRA owned property is this. The
Image from Canva Pro percentage of property ownership by the IRA is the same percentage of profits that go back into the IRA tax deferred. Only the percentage of ownership attributable to the borrowed or mortgage amount is what is taxed when it comes to determining the gains for the IRA. This is the advantage you don’ t have with any other investment! I hope this
MEET MARK ROBINS
Mark Robbins has pioneered nonrecourse financing for IRA investors since leveraged financing became available to the public through a small bank in the Midwest in 2004. Since that time only a few select banks even offer these loans. He has established and maintained relationships with these lenders over the past twenty years.
Mark has obtained nonrecourse loans, per IRS regulations, for numerous real estate investors in more than 30 states including Hawaii. Mark is a preferred provider for many of the IRA servicing companies including the Equity Trust Company, uDirect IRA, the Provident Trust Group, Entrust and many other IRA custodial and administrative providers for clients who require nonrecourse financing for their IRA funded real estate investments.
Mark graduated from New York University in Bronx, New York with a B. A. in History and Western State College of Law in Fullerton, California with a Juris Doctorate( J. D.). Mark is an entrepreneur and has operated several different
explanation of the tax treatment for IRA owned properties helps you to better realize the benefits of holding real estate in your respective retirement accounts!*
* FOOTNOTE: Please note that the investor( s) should always consult their respective tax specialist about taxes in general. I am not an accountant, however, I have been facilitating nonrecourse loans for real estate investors since they were first introduced to the public in 2004 by North American Saving Bank based in Kansas City, Missouri. My experience has given me a great deal of knowledge and understanding about this subject.
businesses over the past forty years including a division of a major commodities investment firm, his own hitech executive search company and presently a commercial real estate mortgage brokerage company known as Lending Resources Group Inc. that he founded in 2007.
He has been a real estate investor and developer having designed and built four homes since 1982. He became a mortgage banker in 2002 with Bank of America and went on to work for CTX Mortgage, a division of the home building company, Centex Corp., in Dallas. Mark was recruited to start an inhouse mortgage division for a popular townhome development company in San Francisco in 2006. That firm dissolved in the wake of the financial crisis in 20072008. During his tenure in mortgage banking, Mark has generated more than $ 120 million in residential and commercial mortgages for homeowners and investors nationwide.
If you have any questions about how to invest your IRA in real estate, please contact Mark at 4153091803 or by email: mark @ lendingresourcesgroup. com. You can also reference his website at: www. lendingresourcesgroup. com.
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