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Self directed IRAs under attack in proposed tax bill

advantaira.com

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Re: Self directed IRAs under attack in proposed tax bill

#101

Post by 2arrs2ells »

mariojv wrote: post #73

I'd recommend reading the proposed provisions themselves directly from the Ways & Means Committee instead of the main article urging action: https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax... Highlights: 1. You can't add new contributions to tax-advantaged accounts if their total value exceeds $10 million and you make over $400K for single filers, amounts indexed to inflation. 2. There are required minim…

Re: revenue generated, if this [1] article about Peter Thiel's $5bn Roth is correct, that's $1bn+ in lost long term capital gains tax on him alone!

(That said, I'm guessing the intent of the provision is more about fairness/eliminating a loophole for the wealthy than strictly generating revenue).

[1] https://www.propublica.org/article/lord-of-the-roths-how-tec...

Re: Self directed IRAs under attack in proposed tax bill

#102

Post by wanderingstan »

mariojv wrote: post #73

I'd recommend reading the proposed provisions themselves directly from the Ways & Means Committee instead of the main article urging action: https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax... Highlights: 1. You can't add new contributions to tax-advantaged accounts if their total value exceeds $10 million and you make over $400K for single filers, amounts indexed to inflation. 2. There are required minim…

Thank you for the succinct summary. I agree it all seems reasonable, even too modest.

Having these basic guardrails in place may be a good first step, and in the future the thresholds could be dropped below $10MM and 400K.

Re: Self directed IRAs under attack in proposed tax bill

#103

Post by wpietri »

midasuni wrote: post #81
the_optimist wrote: post #15

The income has already been taxed. The economics are identical to other qualified retirement plans. This is simply more about restricting freedoms and making excuses for targeting Peter Thiel personally.

I’ve never understood why we tax income rather than wealth. Taxes pay for a stable society (army, police force, etc), which has more value for the wealthy. Taxing tends to remove incentive to do something by increasing the cost. We want people to be productive (get paid an income) Taxing wealth rather than capital gains and income seems far better, once you set aside the enforcement part of the conversation. Once you…

This simple answer is it's easier. Income is mostly cash-denominated, so it's very easy to value. Wealth is often illiquid, so it's hard to know how much to tax.

Look at property tax, for example. It's a wealth tax and it requires a very complicated apparatus to generate ok-ish numbers every year. But that mostly works because houses are a moderately liquid market, so appraisers can mark to the existing market. And even then there's a lot of dubious stuff around the margins, like the way Trump was giving different valuation numbers depending on whether he wanted a loan or to brag (high valuation number) versus paying taxes (low valuation number).

Re: Self directed IRAs under attack in proposed tax bill

#104

Post by PaulDavisThe1st »

czbond wrote: post #50
selykg wrote: post #8

Earlier quoted context omitted.

This has no impact on the average person in the low to middle class income range. This is just a loophole allowing the rich to put a bunch of money into their IRAs and watch it grow in a tax advantaged way. The average person that's putting the max of $6k (or less) into their IRA is not impacted by this and it's business as usual for them. I believe this is in response to people like Peter Thiel https://www.propublic…

Does the fact that more rich do it mean it's wrong? Or that low and middle income should use it as a model and the practice should be encouraged? I mean, if private citizens can build themselves up without being beholden to social security and Wall Street - why is this bad? What if - instead of the government keeping us to the lowest common denominator (social security) they encourage, educate, and allow everyone to…

Congress did not intend that the Roth IRA, given the rather low annual contribution limit, would allow someone to accumulate essentially unbounded amounts of gain in a tax-free way.

If you read up on what Thiel (and presumably some others did), yes, they successfully invested using their IRA, but yes, they also took advantage of the tax status of a Roth to avoid paying capital gains tax.

They will not be retroactively penalized for this (the law doesn't work this way), but their doing this has now made at least some in Congress want to prevent this from being possible in the future, since it was not what the Roth IRA was intended to allow.

Re: Self directed IRAs under attack in proposed tax bill

#106

Post by technick »

darkerside wrote: post #30

The whole article is predicated on the lie that low and middle income earners are buying private placements and LLCs in their IRAs. They are not. Full stop.

That's a massive flex on your part, I know a co-worker who did this and he earns less than 185k a year.

Re: Self directed IRAs under attack in proposed tax bill

#108

Post by belltaco »

czbond wrote: post #59
darkerside wrote: post #30

The whole article is predicated on the lie that low and middle income earners are buying private placements and LLCs in their IRAs. They are not. Full stop.

The whole deal is a 'we are spending tons of cash, so we need to take it from someone' plan. This isn't a "watching out for the average person" deal.

Or maybe it's trying to close loopholes around having to pay taxes.

>The whole deal is a 'we are spending tons of cash, so we need to take it from someone' plan

Funny how spending tons of cash is a problem only if it benefits poor and middle class people. I never saw this outrage on trillions spent on endless wars, since that benefits rich people. But if something helps poor or middle class and hurts rich people a little, there is a big outrage.

Re: Self directed IRAs under attack in proposed tax bill

#109

Post by itsananderson »

lettergram wrote: post #57

Just so people are aware, high income individuals can’t use IRAs. This is a direct action against middle to low income individuals. https://www.irs.gov/newsroom/new-income-ranges-for-ira-eligi...

Untrue in practice. High income individuals have several loopholes they can use to make Roth IRA contributions.

https://www.nerdwallet.com/article/investing/backdoor-roth-i...

https://www.forbes.com/advisor/retirement/mega-backdoor-roth...

Re: Self directed IRAs under attack in proposed tax bill

#110

Post by moate »

benmw333 wrote: post #41
colinmhayes wrote: post #34

Earlier quoted context omitted.

Restricting the freedom to dodge taxes...

... taxation is theft.

No, it's payment for goods and services. If you want to live in a stateless utopia, you don't get any of the benefits of the state. That's the social contract.
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