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You have the ability to invest in tax liens or tax deeds in your IRA or other retirement account. Learn more about this investment type and how it works.
A tax lien is the purchase of a lien on a property, typically related to unpaid taxes. A tax deed is the purchase of a property from the county as a result of the non-payment of taxes. The process and rules may vary across each county and you may attend an auction to facilitate the investment in one of these assets.
Investors are often attracted to property tax liens/tax deeds because of the relatively low capital necessary, the potential returns and the ability to be involved in real estate without much of the responsibility of owning the actual property.
A tax lien is a lien imposed on the property by law to secure payment of taxes. Tax liens may be imposed for delinquent taxes owed on real property or personal property, as well as a result of failure to pay income taxes or other taxes. It is imposed by the county in which the property is located.
An investor will purchase the lien from the county for the possibility of one of two profitable results:
Some states don’t offer tax lien investments, but rather tax deeds. A tax deed sale is the forced sale conducted by a governmental agency of real estate for nonpayment of taxes. In this case, an investor has an opportunity to buy a property deed at discount.
Like many other assets, it’s possible to invest in tax liens using your IRA, 401(k), or other retirement account. You have the freedom to invest in nearly anything in your account, provided it’s a self-directed account.
No matter what type of asset you’re investing in, there are important rules to remember when investing using your retirement account:
For the complete list of rules, visit the IRS website.
To learn more about tax lien investing in an IRA and how it works, read this case study, Tax Lien Sale Nets $92,000 in Profits.
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Schedule a one-on-one session with an expert alternative investment counselor. We’re here to answer any questions, help guide you through the process, and provide more detailed information and education specific to your journey.
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