Texas Self-Directed IRA

Texas Self-Directed IRA

Texas Overview

Texas is widely-known as a tax-friendly jurisdiction for retirees, with a reasonable cost of living in almost all areas of the state. There are no state income taxes, and bankruptcy laws are very favorable to debtors.

In addition, Texas has multiple amazing regional culinary traditions, from its unique Tex-Mex style of cooking in the south to a rich and storied barbecue tradition rivaled only by the great state of North Carolina. But that’s not all. Vibrant cities like Dallas, Austin and Houston are attracting some of the finest restauranteurs and chefs in the country. Texas may be the best affordable state for dedicated foodies in the country.

Furthermore, Austin probably takes top honors as the weirdest state capital in the country.

The mild Texas winter means you can golf almost year-round, though you will probably want to take some time off in the summer in most of the state, as summer temps can reach well over 100 degrees, with lots of humidity.

Top Texas golf courses include Whispering Pines in Trinity, Dallas National Golf Club, Bluejack National in Montgomery, Preston Trail Golf Club in Dallas, Colonial Country Club in Fort Worth, Spanish Oaks Golf Club in Bee Cave, Austin Country Club, Briggs Ranch Golf Club in San Antonio, Royal Oaks Country Club in Houston and The Club at Carlton Woods in Woodlands.

The cost of living in Texas is quite reasonable, though housing costs are much higher in certain high-demand areas like Austin and the North Dallas suburbs around Frisco, Plano, Austin and McKinney.

People drive a lot in Texas, so you have to account for the cost of transportation. According to Sperling’s Best Places, transportation costs in Texas are about 19% higher than the national average.

Why a Texas 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, a Texas 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, Texas Self-Directed IRAs come with all sorts of investment protections.

Understand Your Texas 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 Texas 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 Texas 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 a Texas 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 a Self-Directed IRA protection, it’s 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:

  • You
  • 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.

Getting Started with American IRA

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 a Texas 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 Texas Self-Directed IRA Owners

Texas is a relatively tax-friendly state for Texas Self-Directed IRA owners. Perhaps more important for some, Texas is also an extremely debtor-friendly state when it comes to bankruptcy protections. Texas residents can exempt an unlimited amount of home equity from bankruptcy seizures (provided they have lived in the home long enough) and can also shield an unlimited amount in annuities and cash value life insurance from creditors.

The cost of living is modest in most of the state, though parts of Austin, Dallas, San Antonio are getting quite pricey. Texas has several of the hottest housing markets in the country, making the Lone Star State very attractive to Texas Self-Directed Real Estate IRA investors.

The state retail sales tax is currently 6.25 percent. Counties may add up to 2 percent to that state sales tax, for a total of up to 8.25 percent.

Texas does impose a series of sales and use taxes on specific industries. You can get a full breakdown at the Texas Comptroller’s site, here.

Estate and inheritance taxes.

Texas does not have any form of estate tax or tax on inheritances. This makes Texas a great state for those with children and grandchildren to whom they would like to pass on a financial legacy.

However, all Texas residents must pay federal taxes on estates over $11.4 million per individual (up to $22.8 million for married couples). There’s no avoiding that within the United States.

State income taxes.

Texas has no income tax. That means distributions on Texas Self-Directed IRAs, 401(k)s and other retirement accounts are free of state income tax in Texas. Social Security, private and military pensions are likewise free of state taxes in Texas.

State income taxes on Texas Self-Directed IRA Income

Texas is one of a handful of states that impose no state income tax on any income, much less on Texas Self-Directed IRA income. The lack of any state income tax whatsoever helps to make Texas a popular destination for retirees.

Texas Self-Directed Real Estate IRAs

While Texas has no state income tax, it has to make up that revenue somewhere. Property taxes tend to be high throughout the state.

Property taxes in Texas currently average 1.86 percent of a home’s assessed value, which is well above the national average. If you own a $200,000 home, you can expect an annual property tax bill of $3,720 per year. That’s not far from the mark: Data from Trulia pegs the average Texas home value at $196,000, while Sperling’s Best Places estimates it at $186,000.

While the housing market in Texas has been red hot in recent years – landlords have been doing well on price appreciation – investors should plan for that 1.86 percent carrying cost thanks to property taxes.

Additionally, Texas Self-Directed Real Estate IRA owners near the coast should not skimp on hurricane/windstorm insurance, as well, for obvious reasons. Deductibles are substantial, as well, with deductibles of 2 percent to 5 percent of a property for hurricane/windstorm damage being common. Inland, hurricanes are less of a risk. But tornados and floods are very real risks, and all Self-Directed Real Estate IRA investors should insure accordingly.

Benefits of Retiring in Texas

If you are interested in seeking retirement in Texas, or if you simply want to think about it as a long-term option, you might consider a Self-Directed IRA. A Texas 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 Texas? Want to learn more about how to take advantage of all of the retirement capabilities you have? Then it’s time to think about a Self-Directed IRA. Continue browsing this website to learn more about a Texas 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 Texas Self-Directed IRAs, Self-Directed Roth IRAs, Self-Directed SEP IRAs, Self-Directed SIMPLE IRAs and even Self-Directed CESAs and Self-Directed HSAs.

A Texas 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 a Texas 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).



For other easy Texas Self-Directed IRA solutions, talk to our valued partner TurnKey IRA.