3 Year-End IRA Tax Minimizing Strategies for Real Estate IRA Investors in 2024

By J.P. Dahdah, Founder & CEO of Vantage IRA

As we approach the end of 2024, Self-Directed IRA (SDIRA) investors—especially those in real estate—have unique opportunities to optimize their retirement accounts and reduce tax liability. The Secure Act 2.0, which brought several changes, impacts year-end tax planning strategies for SDIRA holders so we wanted to share three strategies real estate IRA investors should consider before December 31, 2024.

1. Leverage the New Roth Conversion Opportunities

The Secure Act 2.0 introduced flexibility for Roth conversions, making it possible to convert SEP IRAs and SIMPLE IRAs to Roth IRAs starting this year. AZREIA members making real estate investments with SEP or SIMPLE IRAs may benefit from converting these to Roth accounts, allowing them to enjoy tax-free growth and withdrawals in the future. Additionally, Roth IRAs don’t have required minimum distributions (RMDs) during the account holder's lifetime, which is beneficial for investors who want to maximize their tax-free growth potential in real estate holdings.  Anyone facing a lower-income year in 2024 is a great candidate for a Roth conversion since it can reduce your overall tax liability on the conversion. Keep in mind that conversions are taxable, so it’s wise to consult with a CPA or tax advisor to evaluate the tax implications and ensure that any conversion is financially beneficial.

2. Take Advantage of Increased Contribution Limits

The Secure Act 2.0 also raised catch-up contribution limits, making 2024 a great year for investors over 50 who want to maximize their annual contribution to their retirement accounts. Those with Self-Directed IRAs should take full advantage of these limits, especially if they are close to retirement and need to bolster their accounts quickly.

In 2024, the standard contribution limit for IRAs is $6,500 (or $7,500 for those aged 50 or older). Additionally, for high-income earners, the new "income-indexed catch-up limit" applies to employees earning $145,000 or more, allowing for even larger contributions in workplace retirement accounts. By maxing out contributions to a Self-Directed IRA or Self-Directed Roth IRA, real estate investors can shield more income from taxes and increase the capital available for property investments.

3. Strategically Defer RMDs with the New Age Threshold

With the Secure Act 2.0 pushing the required minimum distribution (RMD) age to 73 in 2024 and eventually to 75 by 2033, IRA account holders have more time for tax-deferred growth. This means real estate investors in their early 70s can delay RMDs and avoid taxable distributions until they are required.

If you’re turning 73 in 2024, assess whether it makes sense to delay distributions, especially if you don’t need the income. For investors with other income sources, this strategy allows real estate assets within an IRA to appreciate, offering the potential for future tax-advantaged distributions or reinvestment opportunities.

Even though each of these strategies offers Self-Directed IRA investors simple yet impactful strategies to reduce their tax liability while maximizing retirement savings, it is important to prioritize taking the time soon to evaluate if any of them can be financially beneficial for