tax advantaged rent incom

If I only have rental income from my properties and don’t have earned income from a job, is there a way to put the rental income into a tax advantaged account like an IRA? My wife is maxing out her contributions at her work, so that doesn’t help me. Currently, I’ve been putting the rental income into a taxable brokerage account, but I think tax advantaged accounts would be the way to go, thought it seems like you need "earned", not "passive" (rental) income, to contribute. Any thoughts? Thanks!

--74.102.xx.xx

tax advantaged rent incom (by Sir Walter [NC]) Posted on: Dec 3, 2022 11:40 AM
Message:

Look up SEP or solo 401K, and then consult with a good tax advisor.

Create an S-corp to manage the LLCs or trusts which own your rentals. Become an employee of the S-corp. The S-corp pays your salary, which is earned income.

I am not a tax expert, so get your own expert.

--156.146.xx.xx

tax advantaged rent incom (by BillW [NJ]) Posted on: Dec 3, 2022 12:14 PM
Message:

Sir Walter, you got me thinking I need to get a tax advisor and financial planer. This was brought up a few times by persons in the "retirement plan advice" post. As Rex Kwan Do said in Napoleon Dynamite: "we use the buddy system. No more flying solo. You need somebody watching your back at all times". Any ideas how to find someone? Ask friends? Read Yelp reviews? Thanks! --74.102.xx.xx

tax advantaged rent incom (by Wilma [PA]) Posted on: Dec 3, 2022 12:28 PM
Message:

I don't know if you are a Dave Ramsey fan, but we used a fee-only financial planner who was one of their Endorsed Local Providers. We were extremely pleased with this person. Look on the Ramsey Solutions website. --173.62.xxx.xxx

tax advantaged rent incom (by Wilma [PA]) Posted on: Dec 3, 2022 12:28 PM
Message:

Sorry. Phone froze up. --173.62.xxx.xxx

tax advantaged rent incom (by Ray-N-Pa [PA]) Posted on: Dec 3, 2022 8:46 PM
Message:

If your wife works, you qualify for a spousal IRA. I would recommend making it self directed. If you still have 10 or more years before you plan on drawing it, I would also tell you that a Roth is awesome.

If you want to do even more, instead of an IRA you can make that a SOLO Roth 401K by creating active income.

If your property is in a trust, then have an LLC with no assets as the trustee that manages the place. That LLC can pay you 6% management fee. You can claim that as active income and qualify for active income. --24.101.xxx.xxx

tax advantaged rent incom (by Sir Walter [NC]) Posted on: Dec 4, 2022 4:54 AM
Message:

BillW,

Identify some business organizations in your area that are general purpose business organizations, and not just the real estate group echo chambers. Attend some meetings or contact the leaders and ask who are the advisors and planners frequently mentioned in their groups. Get several names.

When you are interviewing them, find out what types of clientele they have a good deal of expertise with and what sorts of business structures/products they deal with.

If a financial planner is too narrow focused on the standard IRA sold to the general population of workers (draw it down until you die or until you are broke), move on. They planner is a good planner for someone else.

Likewise, when talking with a tax advisor, you don't want the H&R Block or I took a tax course advisor. You want a CPA or accountant that you can do tax planning with, and has experience in real estate. Ask them who they service and how many rentals they own, or the accountant who will be assigned to do your taxes owns. --154.21.xx.xx

tax advantaged rent incom (by BillW [NJ]) Posted on: Dec 4, 2022 8:20 PM
Message:

Thanks Wima, I’ll check that out.

Thanks for that Ray-N-Pa. I reviewed some of your previous posts, and I see these are not new ideas for you. Now that my kids are done with college, I’m looking to put away a lot more than the 7k of an IRA. Ideally, if I could put away 30-50k in a tax advantaged account that would be nice. Sounds like I need to pay someone to figure this stuff out, as I got a long way to get smart as you on this.

Sir Walter. that is good advice about finding and qualifying the right person. Thank you.

--74.102.xx.xx

tax advantaged rent incom (by Small potatoes [NY]) Posted on: Dec 5, 2022 10:58 AM
Message:

am I missing something? unless you qualify as a re professional by the irs rental income is passive, not sure all the layers pass muster --172.58.xxx.xxx

tax advantaged rent incom (by BillW [NJ]) Posted on: Dec 5, 2022 11:08 AM
Message:

That is the question: is there way to contribute to a tax advantaged account if I only have rental, not earned, income. --74.102.xx.xx

tax advantaged rent incom (by Ray-N-Pa [PA]) Posted on: Dec 5, 2022 3:09 PM
Message:

It is not hard to be a real estate professional.

Don't have the hours?

Do you do property management - take a management fee, claim self employment tax and you have earned income.

--24.101.xxx.xxx

tax advantaged rent incom (by BillW [NJ]) Posted on: Dec 5, 2022 6:42 PM
Message:

I think I already claim to be a real estate professional. I googled and it seems that alone doesn't give me earned income. I did see, like you said: "you can set up a management company to manage your real estate portfolio. The company then “pays” appropriate management fees to the management company. Making this adjustment will have little if any affect on your operations while creating earned income for you." Thanks! --74.102.xx.xx

tax advantaged rent incom (by BillW [NJ]) Posted on: Dec 6, 2022 1:24 PM
Message:

As I looked into this more, I see you pay more taxes on earned income, vs passive, because of self employment taxes, so maybe it wouldn't be worth doing it to contribute to an IRA --71.127.xxx.xx

tax advantaged rent incom (by Sir Walter [NC]) Posted on: Dec 6, 2022 4:54 PM
Message:

BillW, rerun your numbers factoring in the growth from a Roth IRA. Also, ensure that you have contributed enough to Uncle Sam to qualify for Medicare. --154.21.xx.xx

tax advantaged rent incom (by BillW [NJ]) Posted on: Dec 6, 2022 8:11 PM
Message:

Sir Walter, that calculation is above my abilities at the moment, unless I could find a calculator on line :-)

It never occurred to me I wouldn't qualify for Medicare, but that is an interesting question.

I was hoping to get an HSA going and maybe stop paying for my wife's plan and get catastrophic insurance and pay ordinary expenses from the HSA

Thanks! --71.127.xxx.xx

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