Here is part three of this report

Real Estate IRAs: Secrets Revealed – Part Three

Maximize Your Contributions: Write Off Up To $50,000 in Taxes This Year Using IRAs

By: Dick Desich

Hi, !

Below you will find the third, and final, part of the Real Estate IRA Report. In this installment, you will learn about maximizing your tax deductions, estate planning and asset protection.

Real estate investors need to realize that they are eligible to take full advantage of small business retirement plans created by the federal government. These plans are as easy to set up as Traditional or Roth IRAs.

Once established, they become similar to Traditional and Roth IRAs, yet allow individuals to contribute considerably more than the $4,000 limit which took effect in 2007 for those two plans.

If you are interested in receiving greater deductions, a SIMPLE IRA, SEP IRA or Individual(k) may be right for you. With these plans, real estate investors can contribute up to $50,000 annually to their self-directed IRAs and receive a tax write off for that contribution!

Your spouse and children may also participate in the plan and open their own SEP IRAs – as long as they are employees of the company and meet the income requirements.

- The SIMPLE IRA (Savings Incentive Match Plan for Employees) -

We often recommend that investors who receive less than $50,000 in annual compensation choose the SIMPLE. This will allow them to contribute the maximum amount to their IRA.

Another favorable point about this plan is that, if you have employees other than your family, as the employer, you are only responsible to match if the employee contributes funds first. In addition to these benefits, after two years, you may be able to convert your SIMPLE IRA to a Roth IRA.

With a SIMPLE plan, employees can choose to make salary reduction/deferral contributions directly into an Equity Trust SIMPLE IRA, rather than receiving these amounts as part of their regular salary. There is a maximum employee contribution of $10,500 if you are under age 50, and $12,500 if age 50 and over. In addition, the employer contributes matching funds (up to 3%) into their employee’s SIMPLE IRA at Equity Trust.

Your spouse and children may also participate in the plan and open their own SIMPLE IRAs – as long as they are employees of the company and meet the income requirements.

- The Individual(k) or Solo(k) Plan -

The Individual(k) plan, also known as Solo(k), is only appropriate for a sole proprietor or a business (either a partnership or a corporation) in which only the owner(s) and spouse(s) will be covered by the plan. It must be the only plan maintained by the business, and the business cannot be considered part of a controlled group under tax law.

Two components comprise the maximum Individual(k) plan contribution: an employee salary deferral contribution and an employer profit sharing contribution. The employee is able to contribute up to $15,500 through salary deferral, although this may not exceed 100% of pay. The employer profit sharing contribution limit is up to 25% of pay, or 20% for self-employed.

There is a total contribution limit, from both sources, of $45,000, and only income up to $225,000 can be considered.

However, under a “catch up” provision, individuals age 50+ may contribute an additional $5,000 in salary deferrals beyond the $15,500, allowing for a total contribution limit of $50,000 in 2007.

Remember, spouses are eligible to open their own Individual(k) account if they have separate income and are covered in the plan.

- Other Tax-Advantaged Investment Plans -

The new Health Savings Account (HSA) can help slash your health insurance premiums by as much as 70%, and HSA contributions are tax-deductible (subject to limitations). Set aside funds in your HSA to pay current and future medical expenses. An individual may contribute up to $2,850, and a family may contribute up to $5,650 annually for 2005.

The Coverdell Education Savings Account (ESA) is a trust or custodial account created only for the purpose of paying the qualified education expenses of the designated beneficiary of the account. When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary.

The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. Contributions are not tax deductible, but amounts deposited in the account grow tax free until distributed.

In order to maximize their contributions to an IRA and lower their taxable income, they have chosen to have both a Traditional IRA and a SIMPLE IRA. The SIMPLE IRA is one of the small business retirement plans (the others being the SEP and the Individual(k)) offered by Equity Trust Company to clients who are business owners.

John and Mary each take $25,000 in income and each of the children is paid $10,000 by the business. John and Mary each make $4,000 contributions to their Traditional IRAs and $10,000 to their SIMPLE IRAs. (We will assume that the Smiths are both younger than 50; if they were older, they would have been allowed a “catch-up” contribution of $500 more in each of their Traditional IRAs and $2,000 in each of their SIMPLE IRAs.)

Their total IRA contributions are $28,000 and their taxable joint income is $22,000.

The children could actually shelter all of their income, but instead we will say that they each make $2,000 contributions to their Traditional IRAs and $7,000 to their SIMPLE IRAs, leaving $1,000 each in taxable income.

By utilizing multiple IRAs, the Smith family has been able to effectively lower their taxable income from $70,000 to $24,000, a reduction of 66%! More importantly, the family has made $46,000 in IRA contributions at Equity Trust.

Now that they have these funds available in the tax-deferred environment of an IRA, the Smiths can optimize their real estate investing strategies.

Here is an example that illustrates the benefits of an IRA. You can actually make your child or grandchild a millionaire with just $2,000. That may sound too amazing to be true, but the numbers don’t lie.

If you make JUST ONE contribution of $2,000 on the child’s first birthday to his/her Roth IRA, and achieve an annual rate of return of 10%, by the time he/she turns 67, the account will be worth $1,078,816.

Equity Trust Company focuses on specialized investments, which most people, and even financial planning professionals, do not realize are allowed per IRS regulations for IRA investments. Our truly self-directed IRAs provide you with complete flexibility to change and diversify your investments whenever you choose.

In addition to public trading in listed investments, we offer our clients the ability to invest in special assets such as: real estate, tax liens, real estate notes (including mortgages and deeds of trust) mobile homes, private placements and other limited partnerships.

Are you ready to take control of your financial future? Give our Client Service Team a call at 440-323-5491 for additional information, or to request an application. Applications may also be downloaded from our website at www.trustetc.com.

Use your knowledge and expertise to control your future!

Want to learn more about how to combine your own investment knowledge and expertise with the tax savings benefits of IRAs and the high potential profit value inherent in real estate and other alternative investments? Visit our website for more detailed information: www.trustetc.com

Has this seminar sparked some questions that you might have about self directed real estate IRA investing? If so follow the link below for a consultation with a self directed IRA specialist.

With over 33 years of experience we can answer all of your questions and best of all we’ll call you at YOUR convenience.
Get Your Consultation Now >>

Take Our Survey

What did you think of this eSeminar? Let us know your opinion of the material, any suggestions you have to improve it or any questions about self-directed IRAs by completing our short survey.

Complete the survey now >>