Real Estate Income and IRA Contributions
Course: Retirement Planning
Lesson 1: Using IRAs to Build and Distribute More Retirement Income
Student Question:
This page states that rental income is not included in the definition of earned income. If the client is a professional real estate developer whose income is derived mainly from rental income, would they be able to contribute to an IRA utilizing their business income? Is this considered self-employment income for the purposes of determining ability to contribute?
Instructor Response:
Generally, a real estate professional whose business is renting real estate and who materially participates in the business activity has active, not passive, income. If the business is a “flow through” business, the active income is self-employment income. Self-employment income generally qualifies for an IRA contribution.
