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Self-Directed Roth IRA Tax Strategies

Self-Directed Roth IRA Tax Strategies

Using a Self-Directed Roth IRA LLC presents a number of exciting tax planning opportunities. Whether you currently have a Traditional IRA or a Roth IRA, the IRA Financial Group can help you. Our in-house tax and ERISA professionals have significant experience to help our clients. We will guide you through the process of using a Self-Directed Roth IRA LLC.

Self-Directed Roth IRA Tax Strategies – Investments

Let’s discuss the primary advantage of using a Self-Directed Roth IRA LLC to make investments. First, all income and gains grow tax-free. In other words, they will not be subject to tax upon withdrawal or distribution. Unlike traditional IRAs, you are typically not subject to any tax upon taking Roth IRA distributions once you reach the age of 59 1/2. This presents you with many exciting tax strategies, a few of which are below:

  • You can purchase a vacation home in or outside of the United States with Roth IRA funds and move in tax-free at age 59 1/2
  • Purchase a retirement home in or outside of the United States and move in tax-free
  • Buy an office building with Roth IRA funds and then use the building for your own business after you turn 59 1/2
  • Invest in precious metals and then take possession of the metals
  • Spend money in tax deeds and then take possession of the property
  • Buy a distressed property – generate large gains and then withdraw the funds tax-free for personal use
  • Invest in an investment fund – generate large gains and then withdraw the funds tax-free for personal use

All of this can be done when you reach age 59 1/2 or just after.

Roth Conversion Cost (Valuation) Discount Tax Strategies

The amount of taxable income on a Roth conversion is based on the fair market value of the IRA assets subject to the conversion. Therefore, the lower the fair market value of the IRA assets, the lower the taxes due on the Roth conversion. Typically, the standard of “fair market value” is an objective test. It uses hypothetical buyers and sellers.

To determine the cost of an LLC, the valued assets must be the interests in the entity. The IRA Financial Group’s retirement tax professionals and valuation experts have developed a unique structure. It allows you to take a discount when determining the fair market value of the IRA assets subject to the Roth conversion. Therefore, this reduces the amount of tax you will have to pay on the conversion.

The Roth Conversion Valuation Discount Strategy is based on tested case law. The valuation discounts applicable to an LLC with IRA assets typically fall into two categories: (1) a discount for lack of control, and (2) a discount for lack of marketability.

Your retirement tax professional at IRA Financial Group, along with a valuation expert, will develop a customized Roth conversion tax strategy. This will allow you to take a discount of anywhere from 15% to 35% on the value of the IRA assets subject to the Roth conversion. Notably, the Roth Conversion Valuation Discount Strategy can save you thousands of dollars in taxes.

For example, if you have a Traditional IRA and want to convert to a Self-Directed Roth IRA LLC to purchase any alternative investments, using the Roth Conversion Valuation Discount Strategy can save you thousands of dollars on the conversion.

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