Down Payment And Tax Problems
I buy and re-sell residential properties. Could I take some of my 401-k retirement and move it into a self-directed IRA and use that money as my down payment to buy properties? Also, when I sell a property, can't I pay ONLY Capital Gains taxes rather than regular income tax? How do I go about doing this?
Thanks for your help.
Yes, it can be done. It's hard to find an IRA custodian that will permit you to do it, but I'll save you the effort by directing you to www.trustetc.com. Another company that does it Retirement Accounts, Inc., but you'd want to invest through a LLC for a lower annual fee. You have to watch out for prohibited transaction rules when investing in real estate through an IRA. For example, you can't acquire the property from yourself or a family member. And you have to direct all income into the IRA, not your own personal account. Doing otherwise will cause your entire IRA to be immediately taxable.
Real property held for longer than 1 year should qualify for long term capital gains treatment on your taxes.