Buying Real Estate with your IRA.

I have found an interesting investment vehicle for those of you who like to invest in real estate. If you have an IRA account you can invest in real estate tax deferred or if you use a Roth IRA, tax free. There are all sorts of restrictions and rules you must follow to invest in real estate using your IRA. A few of them are you must hire a trustee to transfer the money to the investment, hire a property manager to manage the investment and remit profits to the trustee, and you can not live in the real estate.

When I say you can not live in the real estate, I mean you can not live in the real estate while it is in the IRA or Roth IRA. If you have an IRA, you would simply take a distribution of the FMV of the real estate and pay taxes as if it were a typical withdrawal. If you were in a Roth IRA, you would simply take the distribution tax free (remember you paid taxes on the money going into the IRA).

Caution: Remember there are quite a few guidelines and rules that govern IRA and Roth IRA's. There are all sorts of penalties and taxes to be paid if you do not set up these transactions carefully. Contact your investment advisor for more information. I don't have any contacts to help you with this type of transaction.

Keep accurate records and you will pay less out in taxes each year. By increasing your deductions on several things you will notice this at tax time.

This tip is a starting point for limiting your taxes. All the information is not included here due to space limitations. Always consult a professional before using a tax tip. These tips should be used to ask your CPA or investment advisor about.

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Last modified: April 15, 2003