Ohio Self-Directed IRA
Ohio ranked poorly on a recent “best places to retire” study from MoneyRates.com, tying for the sixth worst state to retire – largely due to a high rate of property crime in the state.
Cost of living is moderate, according to Sperling’s Best Places – averaging about 12.5 percent less than the rest of the country on average. The median home price is a low $130,900, compared to a national average of $216,200 as of January 2019. Health care costs are also significantly lower in Ohio compared to the national average.
Winters can be cold and icy in Ohio, but summers are relatively mild.
Golfers will not have trouble finding great courses: The Muirfield Village Golf Club, the Golf Club in New Albany, the Camargo Club in Indian Hill, Scioto Golf Club in Columbus, Double Eagle in Galena and the Inverness Club in Toledo rank as some of the nation’s best.
Fishing is terrific, with over 50,000 lakes to choose from, and plenty of crappie, catfish and northern pike, and in some areas, walleye, steelhead and bass.
You do not have to be a sports fan in Ohio. But it is going to help: Depending on where you live, you will find Cleveland Indians fans Cleveland Browns Fans, or Cincinnati Reds fans. And you will find Ohio State Buckeyes fans no matter where you live.
But you will be alright as long as you say you hate Michigan.
Why an Ohio Self-Directed IRA?
Stocks. Mutual funds. CDs. Bonds.
For years, you have heard that these are the types of investment vehicles through which to secure your retirement. The stock market tends to appreciate over the long haul, after all, and bonds are conservative and low on risk. Mutual funds have popped up in recent decades as one of the most popular investment vehicles as well, closely monitoring certain aspects of the stock market.
What most people do not know is that these are not the only investment types available for retirement.
In fact, if you choose self-direction, you will find that the IRS allows for all sorts of different types of investments in a retirement account. You can invest in gold and precious metals, real estate, private companies, and more. There are a few select limits on the sorts of investments you can make, but the good news is: you often have more legal options than you have limits.
For many people, an Ohio Self-Directed IRA means freedom, opportunity, and self-determination. It means not being satisfied that the “market” is the only market that exists. It does not mean you have to switch away all of your old investments. But if you want to invest in real estate or gold to help ensure a secure retirement, those options are indeed open…
And, like other IRA types, Ohio Self-Directed IRAs come with all sorts of investment protections.
Understand Your Ohio Self-Directed IRA Plan Options
Let’s take a moment to consider the various retirement account types:
- Traditional Self-Directed IRA: A retirement account in which you can invest pre-tax or after-tax dollars, and in which your investments grow tax-deferred, meaning you will pay taxes on them once you begin withdrawing them. When you start making retirement withdrawals–defined as withdrawals after you turn 59.5 years old–the money is treated as income.
- Self-Directed Roth IRA: Similar to a Traditional IRA, except you make after-tax dollar contributions so you are paying taxes on the front end. This allows your investments to grow tax-free. After the account has been established for 5 years and after you turn 59.5, your withdrawals are tax and penalty-free.
- Traditional 401(K): A qualified plan that allows employees to make pre-tax elective deferrals. Business owners who want to self-direct can use these as well and allow employees to self-direct their accounts.
- Self-Directed SEP IRA: Simplified Employee Pension that allows employers to make contributions to the retirement of their employees. An employer can also contribute to their own retirement with a Self-Directed SEP IRA.
- Self-Directed SIMPLE IRA: Savings Incentive Match Plan for Employees. A “tax-favored” plan that small businesses and individuals can set up for their employees.
- Self-Directed Solo 401(K): A 401(K) plan that a self-employed individual can use for retirement that offers high contribution limits.
As noted throughout, these same accounts offer a high degree of self-direction if you want to direct your own accounts.
A Variety of Investments
One of the chief benefits of directing your own retirement account is that you get to choose your investments from a wide range of options:
- Real estate: Apartment buildings, commercial property, retail space, raw land, etc. If you want to earn an immediate income for your retirement account with your investments, rent can be one of the most powerful ways to ensure that. You can also use leverage in a Ohio Self-Directed Real Estate IRA when using non-recourse loans.
- Private IRA Lending: You can negotiate the terms, interest rate, and length of the loan, as well as other variables like the monthly payment amounts and whether the loan is secured or unsecured.
- Private companies: Public stocks are what most people think of as “investments,” but there are also private stocks to consider. There is a lot of opportunity for growth in private company stock, but also plenty of risk to consider.
- Tax liens: With a high rate of return, these investment types are ideal for self-directing investors with smaller accounts.
- Precious metals: Gold, silver, platinum, palladium. These metals are famous as a “hedge” against economic downturn, which is why many people turn to them as a way to avoid putting all of their eggs in the stock market basket.
- Single Member LLC: An investor can create an LLC to be owned by their Ohio Self-Directed IRA, managing it themselves. This gives a significant degree of protection; however, you will likely want to consult with a professional to learn how to do this properly.
What You Can’t Do with an Ohio Self-Directed IRA
As fun as it is to talk about the various options you can have with a self-directed retirement account, it should be noted that there are certain limits, as well. You cannot self-direct a retirement account to invest in life insurance, collectibles like art, gems/jewelry, coins, alcoholic beverages, and tangible personal property. As enticing as it might be to put that wine cellar under an Self-Directed IRA protection, it is simply prohibited–so look for your protected retirement investments elsewhere.
Who You Cannot Do Business With
A disqualified person is anyone the Self-Directed IRA has decided is not “arm’s length” from the IRA. Your IRA cannot engage in any transactions with these individuals or you risk the tax-status of your IRA.
A Disqualified Person is:
- Your spouse
- Any of your lineal ascendants or descendants (parents, children, grandchildren, and the spouses of children, grandchildren, etc. – including legally adopted children).
- Any investment providers or fiduciaries of the IRA.
- Any entity (a corporation, LLC, trust, etc.) where a disqualified person owns more than 50%.
- Any entity (like previously listed) where the IRA account holder is an officer, director, a 10% or more shareholder, or a highly compensated employee.
Although we have thrown a lot of abbreviations and words at you, you should know that self-directing your retirement is not as complicated as it might sound. The steps are very simple:
- Open an Ohio Self-Directed IRA with American IRA. Make sure to put thought into the type of account you would like to open; review the options available to you and select the one that makes the most sense for your individual situation.
- Fund your account. This is where the options can throw people off. Let’s take a look at them quickly:
- Contribution: Simply putting money into the account throughout the year. This is what a lot of the funding will look like once the account is already opened.
- Conversion: Withdrawing part or all of the cash/assets from a Traditional IRA and putting them into a Roth IRA is called a conversion. Once the cash/assets are distributed, you have 60 days to put them in the Roth IRA account.
- Rollover: A tax-free distribution of cash/assets from one account to be put in another retirement account. You are permitted one rollover per year.
- Transfer: Transferring cash/assets directly from one retirement account to another retirement account. Because you do not take direct possession of the cash/assets, you are allowed unlimited transfers and there is no tax.
How it Works
1.) Open an American IRA Self-Directed IRA
- Select the type of account that you would like to open.
2.) Fund Your Account
- Move money into your account by transfer, rollover or contribution.
3.) Select an Investment
- Find an asset you want your IRA to purchase and submit an Investment Form. American IRA will work with you and your professionals for a smooth closing.
4.) Review the Instructions
- Visit the “How it Works” page on our website to review the instructions for the asset you want to purchase and submit the paperwork required for the investment you have chosen.
5.) Provide Payment Authorization
- Submit Payment Authorization Forms for expenses that pertain to the asset your IRA has purchased.
6.) Submit Deposit Coupons
- Deposit income generated from the asset your IRA purchased by submitting a Deposit Coupon along with the funds.
Tax and Financial Considerations for Ohio Self-Directed IRA Owners
Ohio has a state income tax, but Social Security benefits are fully exempt. Other forms of retirement income and pensions are fully taxable in Ohio, subject to a few exemptions.
Business income. Ohio treats business income as completely separate from other forms of income, and affords it a very advantageous tax treatment: The first $250,000 of individual income from a business is fully deductible on state taxes. Income above that level is taxed at a flat rate of 3%.
Military retirement pay: Generally, retired service-members are entitled to deduct “retired personnel pay” that is related to service in the uniformed services, the reserve components thereof, or the Ohio National Guard. “Uniformed services” include the Army, Navy, Air Force, Marine Corps, Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, and/or the Public Health Service.
If the retired personnel pay is tied to a plan such as the federal civil service retirement system or the federal employee’s retirement system, the portion of that income that is based on the retired service-member’s time in the uniformed services is eligible for the Ohio income tax deduction.
State income taxes on Ohio Self-Directed IRA Income
Ohio charges a state income tax starting at 1.98% on income over $10,651, as of 2019, and gradually increasing to a tax rate of 4.997% on income over $213,350. Expect those brackets to increase in tandem with inflation. Social Security income is exempt. See above for information on Ohio business income.
Ohio sales taxes
Ohio has a relatively high state sales tax rate of 5.75%. counties add additional taxes of between 0.75% to 2.25%, so your actual tax rate will range from 6.5% to 8%. Groceries, prescription drugs and newspapers are exempt.
Ohio Self-Directed Real Estate IRAs and property taxes.
In Ohio, property taxes are based on assessed value, which is 35 percent of market value. The average property tax rate in Ohio is 1.56%, which is somewhat higher than the national average, but not bad when you compare it to other states in the Midwest. The highest taxes are in Cuyahoga County (2.38%), with rates especially high in Cleveland itself, while the lowest property taxes are in Lawrence County (0.87%).
Ohio’s homestead exemption allows homeowners who are permanently and totally disabled, and low-income Ohioans age 65 or older, to exempt up to $25,000 of the market value of their homes from all local property taxes. For example, through the homestead exemption, a home with a market value of $100,000 is billed as if it is worth $75,000.
The exact amount of savings varies from location to location.
The tax exemption is limited to the homestead, which Ohio law defines as an owner’s dwelling and up to one acre of land. The value of the exemption may not exceed the value of the homestead. As of 2019, the income threshold to qualify for the exemption is $32,800.
To qualify, an Ohio resident also must own and occupy a home as their principal place of residence as of January 1 of the year, for which they apply, for either real property or manufactured home property. For individuals who own more than one home, the principal place of residence is the home where the person is registered to vote, and the person’s place of residence for income tax purposes.
Ohio Estate and Inheritance Taxes
Ohio has no estate or inheritance taxes.
Other Ohio Taxes
Ohio’s fuel tax is 28 cents per gallon, added to the federal fuel tax of 18.4 cents per gallon, for a total gasoline tax of 46.4 cents per gallon. There’s a state cigarette tax of $1.60 per pack of 20.
Benefits of Retiring in Ohio
If you are interested in seeking retirement in Ohio, or if you simply want to think about it as a long-term option, you might consider a Self-Directed IRA. An Ohio Self-Directed IRA will allow you to handle plenty of different investments under your own control—all while enjoying the tax protections of retirement accounts.
Are you interested in retiring in Ohio? Want to learn more about how to take advantage of all of the retirement capabilities you have? Then it is time to think about a Self-Directed IRA. Continue browsing this website to learn more about an Ohio Self-Directed IRA or contact us at 828-257-4949 to learn more about how you can secure a retirement for yourself.
About American IRA, LLC
American IRA, LLC is one of the leading third-party administrators for self-directed retirement accounts in the United States. The custodian New Vision Trust Company is a South Dakota regulated trust company. Founder and president Jim Hitt has been investing his own personal assets in Self-Directed IRAs, including Self-Directed Real Estate IRAs, for more than 35 years, and has helped thousands of others declare independence from Wall Street investment companies with their high fees and limited investment menus and become successful Self-Directed IRA investors.
American IRA has offices in Asheville and Charlotte, North Carolina, and Atlanta, GA, but we serve investors from all over the United States and even expats who want to realize the benefits of self-directed retirement investing techniques in Ohio Self-Directed IRAs, Self-Directed Roth IRAs, Self-Directed SEP IRAs, Self-Directed SIMPLE IRAs and even Self-Directed CESAs and Self-Directed HSAs.
An Ohio Self-Directed IRA with American IRA, LLC can help you achieve greater diversification by making it easier to invest in alternative asset classes not commonly available from large investment companies. Self-Directed IRAs also allow you to take more direct control of your retirement assets, while minimizing exposure to needlessly high expense ratios, commissions, wrap fees, 12-b-1 fees and AUM fees commonly charged by Wall Street investment companies. Our much more efficient flat-fee, menu-based fee schedule frequently allows investors to save thousands in fees each year – particularly with larger accounts and buy-and-hold investors.
With an Ohio Self-Directed IRA from American IRA, LLC, you can quickly and easily invest in alternative asset classes like direct real estate ownership, tax liens and certificates, mortgage lending, precious metals, and much more.
To get started, click here to open an account, or call American IRA today at 866-7500-IRA(472).