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Flip Homes Tax-Free with a Solo 401(k)

How much are taxes when flipping homes?

Since the creation of the Solo 401(k) Plan back in the early 1980s, the IRS (Internal Revenue Service) has always permitted a Solo 401(k) to purchase, hold, or flip real estate. By using a Solo 401(k) (also known as a Self-Directed 401(k) Plan or Individual 401(k) Plan) to buy real estate, you will be able to purchase:

  • Raw land
  • Domestic or foreign real estate
  • Residential or commercial property
  • Flip homes

You can do much more tax-free and without requiring custodian consent.

Flipping a Home is as Simple as Writing a Check

With a Solo 401(k) Plan, flipping homes or engaging in a real estate transaction is fast and simple. As trustee of your Solo 401(k) Plan, you will have the authority to make real estate investment decisions on behalf of your 401(k) Plan. In other words, you don’t need the consent of a custodian. One of the true advantages of a Solo 401(k) Plan is that when you want to purchase a home with your Solo 401(k), you can make the purchase, pay for the improvements, and even sell or flip the property on your own. One important advantage of purchasing real estate with a Solo 401(k) Plan is that all income and gains are tax-deferred until a distribution is taken. Distributions are not required until the 401(k) Plan participant turns 70 1/2. In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Related: Solo 401(k) for Real Estate

Flip Homes without Requiring the Consent of a Custodian

A Solo 401(k) Plan is the most efficient and cost-effective vehicle for doing house flips with retirement funds. With a Solo 401(k) Plan, you will be able to use your 401(k) funds to purchase real estate and engage in flipping homes tax-free and without custodian consent. A traditional 401(k) Plan custodian (financial institution) will not allow you to purchase real estate using your retirement funds. Therefore, in order to have the ability to engage in house flipping transactions using retirement funds, a Solo 401(k) Plan is the answer.

Control the Entire House Flipping Transaction

Unlike a conventional 401(k) Plan which requires custodian consent and requires high custodian fees, a Solo 401(k) Plan will allow you to buy real estate by simply writing a check. With a traditional custodian controlled Solo 401(k) Plan, you will have total control to make a real estate purchase, pay for improvements, and then sell the property without ever talking to the custodian. Since all your 401(k) funds will be held at a local bank in the name of the Solo 401(k) Plan, all you need to do to engage in a house flipping transaction is write a check straight from the Solo 401(k) Plan account. Or you can simply wire the funds from the Solo 401(k) Plan bank account. So, you don’t need to ask a custodian for permission or have a custodian sign the real estate transaction documents.

Read: Not All Solo 401(k) Plans Are The Same

Use a Solo 401(K) Plan and Flip Homes Tax Free

One major advantage of flipping homes with a Solo 401(k) Plan is that all gains are tax-deferred until a distribution is taken. In the case of a Roth Solo 401(k) Plan, all gains are tax-free. Therefore, all gains attributable to the house flipping transaction will flow back to your Solo 401(k) Plan tax-free.

IRA Financial Group will take care of setting up your entire Solo 401(k) Plan structure. We can handle the entire process by phone, email, fax, or mail. It typically doesn’t take longer than 2-10 days to complete. However, the timing largely depends on the existing custodian holding your retirement funds. Our 401(k) Plan experts and tax and ERISA professionals are onsite greatly reducing the setup time and cost.

Did you know a Solo 401(k) plan also allows you invest in alternative assets including cryptocurrency, precious metals, hard money loans, and more! Contact us to learn how to get started today!


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