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3 Tax Advantages of Self-Directed IRAs

tax advantages of self-directed IRAsRetirement accounts have a number of tax advantages for savvy savers. With a self-directed IRA, you can put these advantages to use toward alternative investments. Here are some of those advantages. 

Deductible Contributions

The IRS has set up a number of saving incentives to encourage people to plan for the future. Assuming that your income is within certain IRA contribution limits, your annual contributions may be used as a tax deduction on your income tax return. This deduction applies to Traditional IRAs, but is not available through Roth accounts.

Tax-Deferred or Tax-Free Earnings

Because Roth accounts do not allow for deductible contributions, all deposits are made with current-year wages that have already been taxed. Taking the tax hit in the present means that you can take advantage of tax-free qualified withdrawals, avoiding any hit to your earnings in the future. For Traditional IRAs and other accounts, all taxes are deferred until you begin taking distributions during retirement.

Retirement Saver’s Tax Credit

The Retirement Saver’s Tax Credit is something that low-income individuals can take advantage of. With this credit, in addition to being eligible for deductible contributions, you could receive an additional tax break to encourage you to save.


Self-Directed Retirement Accounts

With a self-directed IRA, you can put all of these tax advantages to use while investing in alternative investments. While many IRAs are designed only for stocks, bonds, and other traditional investments, self-directed IRAs open the doors to real estate, gold, private equity, and more.

At tax season you will want to make sure you’re doing everything you can to lessen your tax burden. Speak to a tax professional to see what additional steps you can take, or contact us today to make an IRA contribution.

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