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What Are The Required Minimum Distributions (RMDs) For An IRA Invested In Real Estate?

At 1031 Exchange Place, we specialize in providing information and services related to 1031 exchanges and other real estate investment strategies. When it comes to Required Minimum Distributions (RMDs) for an IRA invested in real estate, it is important to understand the rules and regulations that govern these types of investments.

An RMD, or Required Minimum Distribution, is the minimum amount that a person must withdraw from their retirement account, such as an IRA or 401(k), once they reach a certain age. For traditional IRAs, this age is 72, as per the SECURE Act of 2019.

When your IRA is invested in real estate, calculating the RMD can be slightly more complex compared to IRAs invested in more liquid assets like stocks or bonds. However, the same general rules apply, and the RMD is based on the account’s fair market value (FMV) and the IRA owner’s life expectancy.

Here are the steps to determine the RMD for an IRA invested in real estate:

  1. Determine the Fair Market Value (FMV) of the real estate investment: You’ll need to have a qualified appraiser assess the FMV of the property held within your IRA. This valuation should be conducted annually to keep the RMD calculation up to date.
  2. Obtain the life expectancy factor: The IRS provides life expectancy tables in Publication 590-B. You will need to find your life expectancy factor based on your age in the corresponding table.
  3. Calculate the RMD: Divide the FMV of the real estate investment by the life expectancy factor to determine the RMD amount for the year.

It’s important to note that the RMD must be taken in the form of a distribution from the IRA, which can be cash or an in-kind distribution. If you choose to take an in-kind distribution, you’ll need to transfer a portion of the property out of the IRA and into your personal name.

Keep in mind that RMD rules are subject to change, and it’s essential to consult with a tax professional or financial advisor for up-to-date and personalized advice.

At 1031 Exchange Place, we can help you navigate the complexities of real estate investments within your IRA and provide guidance on how to make the most of your investment strategy. Please reach out to our team of experts for more information on RMDs and other real estate investment topics.