With a self-directed IRA, you can invest in alternative assets that you may not be able to with a conventional IRA. These alternative assets include real estate and tax liens. Tax lien investments through a self-directed IRA are tax-deferred, so you can diversify your portfolio and retain tax advantages. Tax liens typically require just a small amount of money to start investing, so they may be a great option for your investment portfolio.
If you are thinking about investing in tax liens with your self-directed IRA, we cover all the information you need to know to get started.
What You Need to Know About Tax Liens
Tax liens refer to the purchase of liens on properties. Typically, a tax lien is a result of unpaid taxes. A lien is placed on the property to secure payment of these unpaid taxes. A tax lien can be imposed on real or personal property for delinquent taxes or a failure to pay taxes, such as income taxes. Tax liens are imposed by the counties in which the properties are located.
Benefits of Investing in Tax Liens
There are a few benefits of investing in tax liens with your self-directed IRA, such as:
- Low upfront funds required: Typically, you can invest in a tax lien with a small amount of money.
- Straightforward investment: A tax lien is often viewed as a straightforward investment option in real estate. If you want to invest in real estate, but you don’t want to deal with purchasing and owning a property, investing in tax liens may be the right option for you.
- Potential return on investment: There is a possibility that the property owner will repay the purchased tax lien, along with interest on the lien. Repaid taxes and earned interest are paid to you as outlined in a pre-determined agreement. If the owner doesn’t pay the lien by a certain time, you will receive the deed.
Tax Liens vs. Tax Deeds
Some states utilize tax liens, while others provide a tax deed or a hybrid of both. The governing body auctioning the property determines whether a tax lien or tax deed will be placed. Both can be advantageous to invest in.
How to Invest in Tax Liens With a Self-Directed IRA
To invest in a tax lien, potential buyers attend auctions in the municipality. Open a self-directed IRA with Accuplan and invest in tax liens by following the steps below:
- Fill out an application: Use our online form or download and print the documents to complete your application.
- Send application with documents: Submit your application with a copy of your photo ID, completed Transfer Request form and photo ID doc.
- Make transfer request: Per your transfer request, we transfer your funds.
- Complete the Direction of Investment form: Complete the Direction of Investment form and the supporting investment documents.
- Get your investment funded: We fund your investment according to the Direction of Investment form.
If you are wondering which self-directed IRA to use for tax liens, you can open a traditional or Roth self-directed IRA with us at Accuplan.
Contact Us at Accuplan to Invest in Property Tax Liens
Accuplan provides self-directed IRA administration to investors like you who want to add alternative assets to their portfolios, such as property tax liens. Other alternative assets you can invest in with a self-directed IRA include:
- Real estate
- Trust deeds
- Private loans
- Private equity
- Precious metals
*Our information shouldn’t be relied upon for investment advice but simply for information and educational purposes only. It is not intended to provide, nor should it be relied upon for accounting, legal, tax or investment advice.