• Daniel Blue

Capital Gains Tax inside your IRA?



Many people know of the tax breaks IRAs and 401k’s provide. With current contributions limits being where they are at now, we are always looking for more ways to finds some breaks and help with tax relief. By holding investments inside your IRA, you may receive some breaks, as well. When you start getting creative and start holding alternative assets inside your retirement account, that’s when you will see some added tax benefits to your account.


I want to talk about one, in particular: Capital Gains Tax breaks.

In the non-retirement world holding and investing in real estate can have some extra tax implications. One of the biggest is Capital Gains Tax. Each time you flip a house or sell an investment house that sale is susceptible to this tax and it can be a significant chunk out of the earnings of that investment. There is a way to avoid that tax. Buy the property with your IRA or 401k. Since the IRA or 401k is a sheltered status, you aren’t subject to these taxes.


IRS rules make it clear that because whether you generate a short-term or long-term gain in your IRA, you don't have to pay any tax at all until you take the money out of the account. And when you take that money out of the account, you are being taxed at your regular income tax rate. Not at the higher rate of Capital Gains Tax.

This is a unique strategy, and I would always encourage to seek the proper tax help while doing this. But if done right you may just find a way to build your retirement account in a faster way with fewer tax implications to you as an individual.

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