Top 3 Questions IRA Holders Have About Property Taxes

Estimated reading time: 3 minutes

Every year, self-directed IRA (SDIRA) holders who invest in assets like real estate or commercial properties have to keep up with expenses like property taxes.

One thing IRA holders need to keep in mind is that all expenses related to property owned by your SDIRA (maintenance, utility bills, upgrades, property taxes, etc.) must be paid from your IRA diligently and on time.

We've compiled the top three questions IRA holders have about property taxes to make them easier to understand.

1. When Are Property Taxes Due?

Property tax due dates vary by location, as each state and county sets its own deadlines. In general, most property taxes are due annually or semi-annually. Here are a few examples of common schedules:

• California: Property taxes are typically due in two installments — the first on November 1 (late after December 10) and the second on February 1 (late after April 10).
• Texas: Property taxes are due annually, with the deadline usually falling on January 31.
• New York: Deadlines vary by county, but taxes are often due annually or semi-annually, typically in January and July.

For exact due dates, check with your local county tax assessor or treasurer’s office.

2. What Should IRA Holders Do to Make Sure That Property Taxes are Paid?

The client should first determine where their bill is mailed (this is especially important for new asset purchases, as counties often do not update the mailing address for property taxes until the next year).

If they have a recurring payment set up at The Entrust Group, our office simply requires the tax bill. If they receive the bill at their residence, it should be forwarded to our office. If the client does not have an automatic payment with us, they should send Entrust a Payment Authorization Letter along with their tax bill.

They should also be sure to check their email inbox for any bills that may be sent to them to be read and approved (perhaps a good time for certain clients to update the email on file).

As a final check, they should contact the county a few weeks before the delinquent date to determine if their property tax has been paid. This will give them time to fund their account and have the payment sent out before penalties are assessed.

There are times that clients will submit a Payment Authorization Letter for property taxes that will have non-sufficient funds. They should double check their account balance on the Entrust Client Portal before submitting their property tax payment request to ensure quick processing.

3. What Can IRA Holders Do to Make Property Tax Payments an Automatic Process?

One key thing to remember about property taxes is that many counties only send out property tax bills once a year. Some new asset owners might forget to set up automatic payments, and after paying the first installment in December, they can face penalties for missing the second installment due later in the year.

To avoid this, clients can choose the “recurring” option on their Payment Authorization Letter and select the frequency (either “annual” or “semi-annual”). If they want the property tax payments to continue until the asset is sold, they can leave the end date blank. As long as we receive the property tax bill and there are enough funds in the account, the payment will be processed automatically.

For more information about real estate investing inside of a self-directed IRA, download our 5 Steps to Investing in Real Estate Guide, or speak with an Entrust professional today.