Are the gains or income from IRA real estate investments taxable?
The answer in most cases is no, as long as the purchases were made with cash. For a traditional IRA, the income generated while the property was held in the IRA and the gains from the sale will be tax-deferred. For a Roth IRA, they should be tax-free. The tax rules change if the IRA borrows to finance the purchases. As long as your IRA does not incur debt, you can buy and sell property for 20 years or more in your IRA without paying either capital gains or income tax. When you begin to withdraw funds or assets from your traditional IRA, the amount you withdraw will be taxed at the current ordinary income tax rates. If you withdraw $15,000 in cash, you have to add $15,000 to your taxable income as reported on your 1040 tax form in the year of the withdrawal. Please consult your tax advisor or real estate attorney with further legal questions.
