With taxes going up for most people, you might be paying more attention to your tax-deferred retirement investing options, such as your Individual Retirement Account (IRA). And with property prices going up, you might ponder whether you can invest those IRA funds in real estate to both defer (or eliminate) taxes and earn a fair rate of return.

IRAs are a very specific kind of asset. In fact, most taxpayers do not know that IRAs can be used to own other types of assets at some great tax advantages.

For those looking to leverage their IRAs just a bit more and maybe transfer the ownership of some investment assets with greater ease, it is worth your while to consider your options to own investment properties inside of your IRA.

A recent Bloomberg article is worth reading as it asks the question “Can You Use Your IRA to Buy Investment Property?” In short, yes. However, there are certain conditions that render it an unavailable option.

For starters, you need a self-directed IRA. Second, the property must be acquired directly by the IRA itself. In other words, there would need to have been enough funds in the IRA to begin with to purchase the investment property.

Even if your IRA would be eligible to own investment property, you must evaluate how investment property fits into your overall estate plan as far as the IRA is concerned. Obviously, it is rather attractive to grow your IRA on a tax-deferred or tax-free basis. On the other hand, what kind of additional complexities lie in wait upon the eventual sale and perhaps even the transfer to the eventual beneficiary at death? IRAs have a tendency to live on after their owners.

Just like any other financial planning decision, it is essential to consider the tax and estate planning consequences downstream.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.
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