How the Roth IRA Rules Allow You to Invest Your IRA in Real Estate

Are you interested in investing in real estate? What we are about to reveal is one of the best ways to create wealth while investing in real estate. If you have the available cash then this opportunity is for you. Are you familiar with a Roth IRA and the Roth IRA rules?

A Roth IRA is named after Congressman William Roth. It was first introduced by Congress in 1997. The definition of a Roth IRA is that it is a change in the traditional IRA in that it is not tax-deductible and is not taxed when taken out. The tax-free exemption applies to the individual only if they do not take out the money until they are 59.5 years old or older and have held the account for at least five years.

IRA’s were first developed in 1974, in order for people to put money aside for their retirements. The main advantage individuals had with this system is that their money grew instead of being taxed. It also allowed the individual to be in a lower tax bracket at the time of retirement, thus meaning they would pay fewer taxes when the money was withdrawn. The traditional IRA is not as powerful as the Roth IRA however.

A Roth IRA can provide excellent profits in real estate investing. The ability to leverage in a real estate investment is one of the main advantages of this system. The profit you make is put right back into your IRA to be invested again.

Let’s look at an example to help make it clearer. If you bought some real estate with cash and then sold that property, you would be paying a capital gains tax. This can be as much as fifteen percent of your profits. If you used a Roth IRA to purchase the property, then sold it, the full profit would just go back into the Roth to be used to invest again in more property.

Therefore, every time a property is sold, your IRA would expand or grow in size. This is the beauty of the sizable leverage within your real estate investment.

We have already discussed the definition of a Roth, so now let’s focus on the Roth IRA rules. Here are the main rules we should be concerned with:

• you cannot borrow from the account




• you cannot use it as security for a loan




• you cannot use it to purchase real estate for yourself or anyone in your immediate family but you can use it to purchase rental property for the sole purpose to make a profit.

One final important addition to the main Roth IRA rules is that if you are single or file a single tax return, you must make earned income in the amount of $116,000 per year or less and less than $169,000 if you file a tax return jointly with your spouse.

Once you understand the definition of a Roth IRA and the main Roth IRA rules, take advantage of this fantastic wealth building opportunity.