The Top Three Things to do with your IRA before the End of the year:

It’s December! Congratulations, you’ve made it past Halloween and Thanksgiving, and now it is Christmas Time. A perfect time to make sure that you are taking advantage of all of the allowable tax-breaks and deductions for 2014. Here’s an idea that I bet most of you haven’t thought about, and why now is the time to do it:

1. Convert that IRA over to a ROTH and do it now! 

Let’s be honest—tax rates are very low, our country is in deep debt, and Washington is coming after your IRA monies. When you retire, almost every type of income counts in the dreaded PROVISIONAL INCOME calculation that determines how much of your Social Security will be taxable, and if you’ll have to pay the additional Medicare Part B penalties and surcharges,  (Your $104/month premium could be as high as $400!) except for income from Health Savings Accounts, 401(H) plans, Life Insurance loans, and ROTH IRA distributions. Do yourself, your spouse, and your kids a favor and convert now!

2. Off-set your ordinary IRA income tax with tax deductions that pay you back! 

If you convert your $100,000 IRA over to a ROTH in 2014, you’ll have to pay $100,000 in ordinary income taxes (ouch!), but what if you could reduce your ordinary income taxes? You can with a smart investment in Oil and Gas. I’m not talking about the futures market, or an energy mutual fund, I’m talking about a true ownership interest in an actual oil and gas well.

There are currently around 1,800 drilling rigs in the USA that are making about 13-14 million barrels of oil a day. If you are an accredited investor, you can get up to a 90% tax deduction against your ordinary income from an oil and gas general partner investment. Most people think that oil and gas can only off-set passive income, but this is not true. A general partner, can use his $100,000 investment, and receive up to a $90,000 deduction against ordinary income. Like your $100,000 IRA distribution!

On top of that, you’ll get the depletion expenses, etc., for the future years of well use. Be careful, there are lots high commission gas plays out there that are a good deal for the broker, but not for you. Make sure you check out your options.

3. Reduce your IRA distribution by taking advantage of the valuation discount

There is a reason that the rich get richer…..it is because they take advantage of these crazy deals in the tax code and you don’t. Here’s the strategy:

$100,000 into the oil and gas well in your traditional IRA, get 100,000 of purchasing units

Go in as a limited partner, not a general partner.

Because you have just purchased a non-liquid, non-tradeable asset, you can receive a valuation discount

Accounting firm can run the numbers to show a safe valuation discount of 40-50%.

Convert your IRA that is now valued at $50,000 to a ROTH and pay ordinary income on ½ of what you normally would have

Your 100,000 unit ROTH will grow tax-free!

Sell it 5-7 years down the road for tax-free nirvana gain! (a properly structured deal where you don’t pay crazy broker commissions, and reduce fees should return 20% IRR over 5-7 years)

Buyer beware,  make sure you check out, compare, and contrast the different pricing options from the oil and gas companies. It is the wild west out here, so team up with a good accountant, and firm that can lead you through this maze and has done it before. Do yourself a favor, find out more about this little-known strategy and save some money!

Send me your email and I can send you a free report about how this works: dave@anthonycap.com