Close your eyes and picture your ideal retirement. You have a great place to live, plenty of financial security, and all of the free time in the world. Now open your eyes. What’s the most effective way to get from where you are today—to where you want to be, come retirement? Although there are many options available to you, the Real Estate IRA may be one of the most powerful tools in your arsenal.

If you’re still unsure about the Real Estate IRA, it may be time to brush up on the basics. And because some of these basics are overlooked by many people, including investment professionals, it’s important to mention them specifically. Here’s what the media and many mainstream periodicals won’t tell you about Real Estate IRAs in detail:

A Real Estate IRA Can Help You Defer or Collect Income Tax-Free

Let’s be clear from the offset: a Real Estate IRA is not a way to avoid taxes. There is no free lunch even when it comes to the tax-protected retirement accounts the IRS allows investors to utilize. But when you dig deep into owning real estate with a Self-Directed IRA, you’ll start to see just how powerful a tax tool it can really be.

Most specifically, a Real Estate IRA will allow you to:

• Use a tax-deferred exchange inside your IRA to defer the UDIT tax
• Own real estate within a Roth IRA and collect rental income, tax-free
• Sell property within a retirement account without having to worry about the otherwise-applicable capital gains taxes

Of course, if you’re confused about any of these subjects, it’s a good idea to contact a professional who can help you make sense of all these benefits. But for now, keep in mind that if you’re investing in real estate with a heavy tax burden, while aimed at retirement, there may be huge benefits you’re passing up.

You Can Still Utilize a Number of Powerful Real Estate Tools within an IRA

Most notably, you can still utilize leverage when purchasing real estate within an IRA. This is made possible through the use of non-recourse loans, in which the lender will only be able to come after the loan amount itself in the case of default. This actually provides you and your family with an additional layer of protection when utilizing leverage to make a real estate investment.

Another powerful tool is that of partnership. Because many real estate investments that are worthwhile are also highly valuable, many investors choose to partner up and own pieces of these investments. You can still do this with a Real Estate IRA, which means you still have flexibility to utilize investment in large property in order to secure a more prosperous retirement for yourself.

Many people assume that the tax benefits of a Real Estate IRA are outweighed by the disadvantages and limitations therein—but one look at the rules will convince you that this is not the case. In fact, if you’re an experienced real estate investor, you’ll be able to make many of the same investment decisions within an IRA that you would otherwise make. The key is to know the differences, the similarities, and steer your actions accordingly—and within the IRS rules.

Interested in finding out more? For more information about retirement strategies utilizing a Self-Directed Real Estate IRA, be sure to visit our Real Estate Custodians page. And for more information about Self-Directed IRAs and how they can impact your retirement, call us at 866-7500-IRA.