In general, when it comes to making self-directed IRA real estate investments, all expenses associated with the IRA owned real estate must be paid using IRA funds. In other words, payment of any expenses associated with the self-directed IRA real estate investment must be made using IRA funds and not by the IRA owner. The payment of the expenses could come from funds in the self-directed IRA LLC bank account or via IRA contributions made to the IRA custodian. In addition, if applicable, the IRA holder can rollover other IRA or retirement funds to the new IRA custodian who would then ultimately invest those funds into the self directed IRA LLC, which could be used to pay real estate expenses. In the case of additional contributions, for 2013, an IRA holder under the age of 50 years old can contribute $5500 annually to the IRA. The annual contribution figure increases to $6500 for IRA holders over the age of 50.
It is very important to remember that when using retirement funds to invest in real estate, all income and gains generated by the self-directed IRA real estate investment. Accordingly, all expenses associated with the real estate investment, including taxes, repairs, improvements, etc must be paid using IRA funds – no personal funds may be used at all.
To learn more about using retirement funds to invest in real estate, please contact a tax expert at 800-472-0646.