Once More — Best Strategy To Maximize Tax Deductions When Self-directing Ira?
I appoligize guys! First time in Yahoo Answer. I’m 66 and I’m not earning money to put into an IRA. Already have the account and am trying to live off it. The investment firm that has handled the account since I retired hasn’t done very well with it and I would like to try my hand at self-directing it.
I would like to set up a business as a trader to generate income and grow the account. What is the best business strategy for me in pursuing this as a business that will minimize my tax libility? Thanks for your help.
If you are going to do short-term trades, there isn’t a tax advantage to be had inside of an IRA. All income from the IRA is going to be taxed as ordinary income.
There are no deductions for any investment activity inside an IRA. Even if you pay your investment fees with after-tax money, it is not deductible.
If you plan on long-term investments that generate long-term capital gains, you will pay less tax if these investments are outside of the IRA. You may want to withdraw more than you need to live on each year and invest what you don’t spend in long-term investments.
The IRA is your asset. Your trades within it are just that trades. This is *not* a business.
Any gain increases the value of the IRA. You have more to take out and pay ordinary income tax on it.
You cannot create a business solely for this IRA and try to pull a magic rule out that says you can not lower your taxes because of it. The only aspect is that you will have investment expenses that you *may* be able to itemize if you pay for these expenses with NON-IRA money. (If you follow the norm and pay the investment expenses with IRA funds, they are *not* deductible as they simply reduce your funds to take out later.)
First, there are no deductions for what happens inside an IRA. If you do not put in additional money, then there are no deductions to maximize.
Second, the way to minimize your tax liability is to take no money out. Any distributions are subject to ordinary income tax. If there are no distributions, then there is no tax until age 70-1/2. Starting at age 70-1/2, there is a required minimum distribution (RMD).
If you mean that you’re going to do the trading within the IRA account, then there shouldn’t be any tax liability as far as capital gains. Your distributions, of course, will be taxed as ordinary income (unless its a Roth IRA).