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Intermediate1.5 hours14 terms

Roth Conversion Key Terms: Retirement Planning

This curated collection offers key terms that might be helpful when exploring Roth conversions in retirement. It's designed as a quick reference to understand commonly referenced concepts and tax-planning strategies for your investment accounts.

Term Collection

1

Adjusted Basis

The adjusted basis is the original cost of an asset, such as real estate, plus the cost of any capital improvements, minus any depreciation deductions and certain other adjustments. It's crucial for calculating taxable gains or losses upon sale.

Intermediate13-14 min
2

Property Sale

A property sale is the legal process of transferring ownership of real estate from one party (the seller) to another (the buyer) in exchange for money or other agreed-upon consideration. It involves several steps, including listing, negotiation, and closing.

Beginner2-3 min
3

Taxable Income

Taxable income is the portion of an individual's or entity's gross income that is subject to taxation after all allowable deductions, exemptions, and credits have been applied. For real estate investors, it determines the actual income on which taxes are paid.

Intermediate12-13 min
4

Depreciation

Depreciation in real estate is an income tax deduction allowing investors to recover the cost of an income-producing property over its useful life, excluding land value, thereby reducing taxable income.

Intermediate13-14 min
5

Capital Gains Tax

Capital Gains Tax is a tax on the profit realized from the sale of a non-inventory asset, such as real estate, calculated as the difference between the selling price and the adjusted cost basis.

Intermediate13-14 min
6

Self-Directed 401(k)

A Self-Directed 401(k) is a retirement plan for self-employed individuals and small business owners with no full-time employees, allowing them to invest retirement funds in a broader range of assets, including real estate, private equity, and other alternative investments, beyond traditional stocks and bonds.

Intermediate9 min
7

Self-Directed IRA

A Self-Directed IRA (SDIRA) is a specialized retirement account allowing investors to hold alternative assets like real estate, private equity, and precious metals, offering enhanced control but requiring strict adherence to complex IRS regulations to avoid prohibited transactions and Unrelated Business Income Tax (UBIT).

Advanced11-12 min
8

Tax Deferral

Tax deferral is the legal postponement of paying taxes on investment gains or income until a future date, allowing capital to remain invested and grow through compounding.

Intermediate13-16 min
9

1031 Exchange

A 1031 Exchange allows real estate investors to defer capital gains and depreciation recapture taxes when selling an investment property by reinvesting the proceeds into a new "like-kind" investment property within strict IRS timelines.

Advanced15-18 min
10

Cost Segregation

Cost Segregation is an IRS-approved tax strategy that reclassifies components of a commercial or residential rental property into shorter depreciation schedules, accelerating tax deductions and boosting immediate cash flow for real estate investors.

Intermediate13-14 min
11

Adjusted Gross Income

Adjusted Gross Income (AGI) is an individual's gross income minus specific deductions, often referred to as "above-the-line" deductions. It serves as a foundational figure for calculating tax liability and determining eligibility for various tax credits and deductions.

Intermediate5-6 min
12

Passive Income

Passive income refers to earnings from an enterprise in which an individual is not actively involved, typically generated from real estate investments like rental properties, REITs, or syndications, requiring minimal ongoing effort after initial setup.

Intermediate13-15 min
13

Tax Planning

Tax planning in real estate involves strategically optimizing an investor's tax liabilities through proactive financial and legal decisions, leveraging deductions, credits, and deferral strategies to maximize after-tax returns and ensure compliance.

Advanced7-9 min
14

Real Estate Professional Status

Real Estate Professional Status (REPS) is an IRS designation allowing qualifying taxpayers to treat rental real estate activities as non-passive, enabling them to deduct passive losses against non-passive income and potentially reduce their taxable income significantly.

Advanced12-15 min

Common Questions