Advanced Real Estate IRA Strategies: Moving Into Your IRA-Held Real Estate

While the IRS has strict guidelines on who can benefit from property held in your IRA, it is possible to actually occupy these holdings yourself. This isn’t a strategy for short-term holds, however. This article will tell you the mechanics involved in the decision to take occupancy of one of your IRA real estate holdings. 

As the IRS strictly prohibits the use of any real estate holding in your IRA by a disqualified person, your decision to occupy a holding must involve a distribution. This is generally performed as an in-kind distribution at the designated property’s current market value, and you will be responsible for any taxes and/or penalties should the distribution occur prior to age 59 ½. 

Part of the process involved in the distribution will include the requirement of a current appraisal, but your particular self-directed IRA custodian can assist you with their individual requirements. 

This can be an excellent strategy for those who have long-term real estate holdings in their IRA and find that their retirement goals make it beneficial to take occupancy. If you’ve reached the IRS-mandated age of 59 ½ for penalty-free distributions (some restrictions apply to Roth IRA account holders – consult your tax advisor), then you can work with your custodian and tax advisor to properly structure the transition of ownership.

You should be wary of companies that advertise that it is possible to occupy a real estate IRA-held property while it is owned/held by your IRA. To do so, you could be subjecting yourself to substantial penalties and loss of the tax-advantaged status of your IRA account. Be sure to consult your tax advisor and IRA custodian to ensure that, should you decide to take occupancy of one of your IRA-held properties, that you do so properly and in accordance with IRS guidelines.

Read InvestorLoft's 7-Part Series on Self-Directed IRA Investing

The information contained herein is for educational purposes only and not intended to replace the experience counsel of your real estate professional, attorney, tax professional or other advisor. Before initiating any transaction, InvestorLoft recommends you seek professional guidance and perform the necessary due diligence in order to make the best possible decisions for your specific situation.