Not disputing that, nor the tax consequences. Not disagreeing at all.

First, to wake up one day and say, "Oh NO, I have RMDs and a big tax bill coming" means that you you haven't done any financial planning to minimize the taxes, and so at the last minute, you don't have alot of options.

Second, to then want to invest in real estate as a landlord, with apparently no experience, just for the income deduction for passive losses, which comes primarily from the larger portion of depreciation, that is a risky venture.

Why? because there is alot of work, especially people as they get older, and there can be "high risk" tenants, which may cost you more in cash than in passive loss write offs. . .

So the answer is to figure out how much to convert to a ROTH or just cash out of the IRA, and pay a one time tax, albeit at the higher incremental rate, and then you don't have to worry about IRMMA, and NIT, etc. . but you still have to pay taxes to avoid the future taxes.

So if you do the math, as a married couple just collecting SS at the max amount, one doesn't have to worry about IRMMA NIT, etc unless your IRA is greater than about $3 M, based upon the current 2024 tax schedules, and growth and withdrawal rates

So is someone just waking up to the RMDs, and panicking unnecessarily because one hasn't done the financial planning out 20 years by year? although he may have to pay increased taxes, but not increased increased taxes?

See a tax professional to do some basic financial planning. . . and yes, capital gains tax may be lower than one's income tax rate, or it may be higher, uncertain for now

I know you know this Coach, but the Long Term Capital Gains Tax Rate is lower than the Ordinary Income Tax Rate on income above $47,151. Effective Tax Rate is a more complicated question, but the basic rate on LTCG is going to be lower.

Again, the OP's question wasn't related to lifestyle choices, management questions or anything of the like ... he was asking about passive investment losses, as it relates to a rental property.

With the exception of a small group, that’s ALWAYS the advice you’ll get on this forum. I stopped asking advice here long ago. Ask AI. Much smarter than TOTV. Sadly, I’m serious. Remember, You’re asking the same age or older and they don’t know the answer either.

Social Media post of the month.

Consider yourself fortunate if you have enough money coming in to cause you to have to have to pay taxes. The vast majority of people will not have that issue.

Don't forget about paying taxes on rental income. Sure, no individual state income taxes in Florida, but rental income is subject to other taxes:

Florida Rental Tax - HomeRiver Group

Yes, why rely on the true life experiences of people on this forum and rely on AI which, if anyone has half a brain and noticed, is not always correct or is vague and unsure. That the way to go! :1rotfl:

You should consider yourself fortunate that you have sufficient income.

The best answer I’ve seen on this site to date. You are, obviously,very bright and well informed. Now, can you explain why one should or should not convert a regular IRA to a Roth IRA? That would be very helpful to a lot of us who are in the RMD of our lives. 😁

Re: converting a traditional IRA to a ROTH IRA

We did this over 3 years for roughly half of my wife's and my IRAs.

There is no easy answer other than when we started back in 2021, there was concern for what would happen in 2025-2026 with the changing tax laws.

Math is required as well as how much in taxes one is willing to pay.

Our conversions over 3 years subjected us to higher federal income taxes. We had moved from Oregon to Florida in 2020 so we avoided the huge tax hit from Oregon state income taxes.

After some research and developing a plan, we hired a ROTH conversion consultant to develop a plan (Craig Wear). The plan went into greater detail than my original plan, but agreed with the overall advantages that a conversion would deliver in the long term.

Stopped converting after 3 years, converted a lot, and only real hurt was being subject to IRMAA for a few years.

A ROTH conversion is not for everyone, so a lot of research is required, in addition to hiring an advisor to assist.

It's all worked out well for us.

The new tax laws might change the process and benefit a bit, so we will revisit in the coming weeks and months.

Our RMDs won't begin until 2026 and 2027. And we deferred taking Social Security until we turned 70 in 2023 and 2024. Fortunately we had savings and a deferred income benefit to tide us over after we retired in 2015 and 2019 (me and wife respectively).

In addition to Craig Wear, there are other consultants who will provide you with a ROTH conversion plan. Just be prepared for that federal income tax hit, and be a Florida resident with no income from other states to avoid that state income tax hit. Oregon's would have been very high for us.

I was responding to Haggar.

A good question. A lot of info is needed to answer this question.

What's your tax rate in the year of conversion? If you're making a significant of money your rate will be high. That leaves less money to invest since now have "x" less taxes. Less money to grow.

What will be your tax rate at retirement?

How much of we talking about in total retirement funds that will be taxed?

It does not make sense for some taxpayers to do the conversion.

There's no one answer to this question but it has to be looked at on an individual basis.

Short term rental income is subject to sales and tourist (where applicable) taxes. These are paid by the renter. So not a consideration for the landlord.

The landlord pay no taxes on rental income to Florida.

I read the article and it is spot on. Why take on the “hassle”
In your 70’s when you have more than enough income to live very comfortably. Life is not permanent so enjoy why you still can.

I did as well. And it expressed everything I have thought about having rental property.

We bought our place in the Villages about two years before we sold our home up north and moved in. In the meantime, we had the home in the Villages Hometown Properties rental program. Not as much hassle vs DIY, but still some hassles with making sure the lawn got cut and the weeds got pulled. We lost about $200 to $500 a month once we paid the VHP 15% cut.

The advantage was we bought the property when prices were low, and before COVID spiked everything. A 33% increase over three years. We could not have afforded this property when we moved into it.

So it worked out for us in our unique situation. But add three years, and we would have been underwater. So bottom line, becoming a landlord is a crapshoot. Do you want to take that chance, and deal with those hassles, when you are old and have to hire people to do everything?

There will always be taxes, the OPs question was about one answer to reduce/avoid taxes. . There are several ways to avoid future taxes, ROTH IRA is one . . However a ROTH IRA does have a disadvantage over a large withdrawal to a standard taxable account, and tax planning is better done sooner rather than at realization that oops, I have new taxes that I didn't have while working.

Always look at taxes as a by product of investment/income success.. . and the management of taxes as an option to retain more of that success. . while working did you wake up one day and start looking for alternative investments once you went into a higher tax bracket?? most likely not. . Would you be better off if you didn't have the investment success so that you can have a lifestyle you want? definitely not. . And remember, at some point, the additional taxes won't impact your life style. .

Yes, we bought before the pandemic and was unable to move down, so we rented. We had some excellent renters, and then we had a couple of poor renters. There was alot of minor and some minor permanent damages everywhere. We were cash positive and tax loss carry forward for most of the time. except one year. However, the rentals were slowly drying up in the off season . . . biggest reason, was that many renters were looking for houses for sale, and the closer you are to new houses being built, the better the chances of more off season rentals.

So we have removed the house from the rental LLC, moving down within the next year, and will have to pay capital gains on the house sale when we sell, all depending upon the scenario in the future, how much, when etc. I don't mind paying them as they will be from proceeds, may be a very small percentage, don't know don't care at the moment. House value went from $365K to $500K, for $135K in cap gains over 5 years, so $13,500 in taxes for every 10% of capital gains tax, for a back of the envelope discussion number.

New tax law: yes, does have some more advantages for rental losses against current income, for LLC owners, small increase. The bigger increase is the offset for SS income for ROTH IRA or other conversions. But the tax offset is currently temporary, for three years, and so if you are going to do some ROTH conversions, then meet with your tax/financial planner, and get a plan in place..

Then you need a new financial investment plan for best how to diversify and invest your three investment accounts to best take advantage of building wealth due each of the three sources each having different tax rates and taxable events.

its a financial Rubik's cube for sure

Every time I have done the math for a Roth conversion, I reject it because it just doesn't make sense. Roth conversions are rarely a good idea. One thing I will mention is that, if you ever need assisted living or a nursing home, you can use your traditional IRA funds and take a huge medical tax deduction, thereby avoiding income tax on a large part of your traditional IRA.

You just articulated how I feel after managing, owning and maintaining 177 apartments for the last 35 years. Just turned 65 and liquidating as soon as possible. Yes, money is good, but it is all consuming. Constant evictions, is part of the game. Still have one building left which generates good income, but I am fried. Always trying to figure out what the next problem will be. Can't get rid of it fast enough.

One thing that would concern me about being a landlord today is the ADA (Americans with Disabilities Act) regarding dogs. A tenant can move into a rental house with a dog or dogs and claim that they are service animals. The landlord has almost no protection against this and they cannot even charge extra for service animals.

While the landlord doesn't pay the sales/tourist tax, he IS responsible for sending the money to the tax collector. He could cover the tax himself, he's not obligated to make the tenant pay for it. But he is responsible for making sure it gets paid.

There are two questions that a landlord is allowed, by law, to ask a prospective tenant with a dog:

1. IS this a "Service Animal" as defined by law? (the only answer the tenant is obligated to give is yes, or no)
2. What service is this animal trained to perform? (you can't ask what it's trained to perform *for the tenant* - only what is it trained to perform, generally).

Everyone with a legitimate service animal has been instructed on this law, they know that these two questions may legally be asked, and they have to answer the questions if they're asked.

If someone says "I don't have to tell you that!" then you don't have to rent the property to them. If someone says "he's trained to sit and stand and he rolls over great" then you don't have to rent the property to them. If someone says "He is a PTSD dog trained to alert a patient to the onset of a panic attack" then yes, that is a valid answer and you'd rent the property to them. Even if that dog is a retired service dog, who is trained to do that, and is now someone else's pet - it's still a legitimate and honest answer and there's nothing you can do about it. The upside to a retired service dog who's now a pet - it means it's an incredibly well-trained pet who is likely to never give the landlord a problem.

Yes, and it also depends on whether a person or business/legal entity owns the property.

Also, some people I know owned a home within their IRA and we're renting it out. According to the IRS, expenses, insurance, and taxes should be paid out of the IRA.

In other words, seek a tax professional for guidance and requirements to avoid surprises.

Personally, I think a landlord should be able to prohibit dogs from residing in their rental house.

Agreed that its not for everyone. IRMMA doesn't kick in for a married couple with two max SS incomes until about $3.0M in an IRA. Then the RMDs can push you into the IRMMA tax brackets. We don't have that much either to consider a ROTH conversion, although we will do a pension payout ROTH rollover just because we can. . and we will feel good about it, whether its perfect financial sense or not. . (basically don't want to feel left out!) and less taxes might help out someday if tax laws change


Anyway, enough on this topic, been thoroughly discussed ad nauseum!

yeah, we had a lawyer rent with a dog. . even though we said no animals, we let him rent. . . though he somewhat lied about the animal as well. . .

whatever, renting is not the "BEST" answer to the OP's sudden awakening!

Just to point out how inconsistent the law is, if a landlord only owns 3 houses or less and doesn't use a real estate broker, the landlord is exempt from all Federal housing discrimination laws involving humans, including racial and gender discrimination. But not dogs.

Conversion makes sense when you are pre-RMD, pre-SS and also have very little income from investments. Then you would ideally convert just enough to stay below the IRMAA threshold.

YMMV

Discrimination bad. But govt shouldn't be telling private owners what they can and can't do with their properties.

Makes sense to me, I find I like dogs more than many people. Seriously, my older brother is blind and totally depends on his highly trained German Shepherd to be his eyes. I am in favor of protecting the rights of people who have legitimate highly trained service dogs. I am also in favor of harsh penalties for the many inconsiderate dog owners who abuse the vagueness of the laws and undermine the legitimacy of real service dogs. Those people should be ashamed of themselves.

All depends upon how much money the retirement account is, regardless of your scenario.

Wow, sure is inconsistent.

Why have headache with real property in a world with Bitcoin :)

https://www.youtube.com/watch?v=89N7VL_u_6k

because bitcoin only has the value from the full faith and credit of the tech bros. . .

just another store of value based upon belief.

no electricity, got benjamins bro?