Promissory Notes with Your IRA
Lending funds using your Self-Directed IRA
Lending can be very profitable. Let your IRA be the bank!
When using personal funds to make a loan, the interest income is taxable at the ordinary income tax rate in the current period. As you can earn a great deal of interest by lending money, the income tax bill can be quite large. However, if you invest using IRA funds, all income is tax deferred till you choose to take a distribution (and with a ROTH IRA there will never be an income tax). This allows more money to stay in the account and increases the effect of compounding.
Things to Know About Promissory Notes Before You Start Investing
- The investment is made by the IRA – not you.
- Only make a loan if you are satisfied that the borrower is both capable and willing to repay the loan on the agreed upon terms. (The IRA Company does not investigate the history or credit information of the borrower.)
- If interested in a promissory note IRA, we suggest you work with a local attorney.
- The purchase should not constitute a prohibited transaction.
An IRA Club Self Directed IRA may make almost any investment for your future. The IRA Club provides our members with a no cost review to help you avoid making one of the few prohibited transactions.