Tax Extensions Passed

Polychron on passage of tax extensions
Posted in Legislative, by NAR on December 17, 2014

National Association of Realtors® President Chris Polychron has issued the following statement on key legislation passed by Congress:

“The package of tax extensions approved by the U.S. House and Senate, and headed to the President’s desk for signature, includes important provisions that will help distressed homeowners and commercial property investors with transactions made during 2014. NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment.

“Realtors® strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed. We are grateful to Sens. Debbie Stabenow, D-Mich., and Dean Heller, R-Nev., and Reps. Tom Reed, R-N.Y., and Charlie Rangel, D-N.Y., for championing the provision.

“The legislation also includes one-year extensions of the 15-year depreciation schedule for leasehold improvements and the deduction for improvements to energy efficient commercial buildings.”

Real Estate is one of the Most Significant Industries in Texas

Going by the latest information from the United States Bureau of Economic Analysis, the third most significant industry of the Lone Star state is real estate. This industry typically contributes about 7.8% – 12% of the GDP (Gross Domestic Product) of Texas.

Texas real estate industry goes across the boundaries of the state and affects the financial activity of other parts of the nation as well. The interrelated finance dealings form a complex web that reflects the scenario of the modern economy. So whatever happens in Texas influences the entire country, and to some extent, the world as a whole.

U.S. bureau report highlighted some facts: 

  • For every $1 million of revenue generates by the Texas real estate industry, about $0.5 million of revenue is earned in other parts of state economy.
  • For every $1 million of revenue generated by Texas real estate industry, 5.16 jobs are generated in the real estate industry, and 5 jobs are generated in other industries in the state.
  • Texas real estate industry has the largest proportion of self employed individuals

About 0.5 million people of the state work in the real estate industry, making it 3.9% of the statewide employment.  Looks like it’s a good time to buy a home in Central Texas.

Real Estate Investment with your IRA

I was speaking with a friend about IRA’s and the topic came up about investing in Real Estate and not just stocks. They didn’t believe me at first, and so I realized this was a perfect topic to blog about. A little know fact is that with a little help you can set up a self directed IRA and an LLC and you can take complete control of your IRA / 401k or other qualified retirement plan and invest in Real Estate!  (Consult with an attorney or the TX Sec of State’s Office regarding forming an LLC and consult with your accountant or CPA regarding an IRA.)

With a self directed IRA, you direct where your IRA invests. For example, with a self directed IRA you can buy a real estate investment property. However, although a self directed IRA expands the number of investment choices available to you, it still has several limitations that you need to know about, and you have a custodian that all transactions are passed through. However there is another lesser known process by which you create an LLC, fully managed by you and you can have complete check writing control of your own IRA. Now don’t get me wrong I am not anti-IRA custodians. It’s just if you In fact, even after you become truly self-directed; you will still have a competent IRA custodian for your IRA account.

There are several limitations related to a run-of-the-mill self directed IRA (An IRA that is NOT Truly Self Directed):

1st – You are have to go through the IRA custodian any time you need to make an investment. In other words, when you run across the deal of a lifetime, you have to ask the custodian’s permission and run the opportunity through their process and in the real world of buying investment property; this does not work too well. In fact many investors have lost opportunities over these types of delays.

With an LLC run IRA you can invest at the moment your ready to make your investment. No custodial process to slow down your investments.

2nd – There are custodial fees. With most custodians, you pay every time a transaction is made, and fees may be assessed on your profits thus lowering your rate of return. In fact custodians may even assess fees to your account just to hold your money.

With an LLC run IRA you will be able retain as much of your money as possible. To move forward with setting up your own LLC run self directed IRA I recommend you get with a professional but isn’t the idea of mixing some real estate into your retirement plans exciting?

Best of Luck!