Great question! UBIT applies to income generated by tax-exempt entities, like IRAs, from unrelated business activities, and is generally taxed at corporate rates ranging from 10% to 37%. UBIT is not part of your personal tax liability; it is paid directly by the IRA or tax-exempt entity through Form 990-T - which Equity Trust can help prepare and submit in fact.
Yes, if your IRA sells a property, it can be subject to depreciation recapture, similar to an individual. This means the portion of the gain attributed to depreciation deductions taken in prior years would be taxed at the recapture rate.
I have a property holding under my IRA through equity trust. It was 100% purchased from my account funding. There are some renovations/energy upgrades I need to do. 1/2 of the cost will be covered by a USDA grants. We will be applying for a PACE loan through NOPEC Ohio for the 2nd 1/2 of the funding. The “loan repayment” will be structured as part of the property tax payments which is part of the expense item in this example. Do I need to file UBIT tax?
This is a great question, and would be best for you to firm up the answer with your CPA or tax professional. If there is debt against the property owned by the IRA, UBIT would likely apply.
This was very helpful and clear. Thanks. Follow-up question: what is the UBIT tax rate? Does the UBIT show up as personal income tax liability?
Great question! UBIT applies to income generated by tax-exempt entities, like IRAs, from unrelated business activities, and is generally taxed at corporate rates ranging from 10% to 37%. UBIT is not part of your personal tax liability; it is paid directly by the IRA or tax-exempt entity through Form 990-T - which Equity Trust can help prepare and submit in fact.
If your IRA sold the property would you have depreciation recapture like an individual would?
Yes, if your IRA sells a property, it can be subject to depreciation recapture, similar to an individual. This means the portion of the gain attributed to depreciation deductions taken in prior years would be taxed at the recapture rate.
I have a property holding under my IRA through equity trust. It was 100% purchased from my account funding.
There are some renovations/energy upgrades I need to do. 1/2 of the cost will be covered by a USDA grants. We will be applying for a PACE loan through NOPEC Ohio for the 2nd 1/2 of the funding. The “loan repayment” will be structured as part of the property tax payments which is part of the expense item in this example.
Do I need to file UBIT tax?
This is a great question, and would be best for you to firm up the answer with your CPA or tax professional. If there is debt against the property owned by the IRA, UBIT would likely apply.
My CPA does not do UBIT and I was trying to get referral from equity trust for CPA specializing on UBIT
I apologize, but we actually do not provide referrals for this circumstance
i see Equity Trust Company provides 990-T form prep service. Are they completed by CPA who is familiar with UBIT?