Sarah Sullivan from Sugo Capital explains that both SDIRAs and Solo 401(k)s let you invest in real estate, funds, and businesses. The key difference: SDIRAs can trigger two taxes (UDFI and UBIT) on certain investments, while Solo 401(k)s typically only trigger UBIT, making them potentially more tax-efficient.
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All right, this is day three of summarizing the tax strategy webinar that we had with our CPA earlier this month. So if you don't know what I'm talking about, look at Monday and Wednesday's email. All right, the number one most asked question via email beforehand and during the webinar. Drumroll please. What's the difference between UBIT, UDFI, Self Directed IRAs and Solo 401s? Okay, so again, I'm not a CPA. Talk to your CPA to make sure that this is how it's going to work for you. But in summary, you, if you want self directed retirement accounts, you can have a self directed ira. And then you can invest in real estate, you can invest in anything you want, or you can have a solo 401k. So if you have a traditional 401k or IRA, you can roll those into self directed accounts, then you can choose what you invest in. So you can still invest in stocks if you want, but you can also invest in funds and syndications and businesses and all kinds of different things with that money. So a lot of our investors, probably 50% of our investors, utilize self directed IRAs and solo 401ks in order to invest in our investments. At Sugo Capital, our personal investment offerings, they're all open to IRAs and, and 401ks. So the biggest question I get is, well, which one is better to invest with? So if you can open a solo 401k, if you can, then I always suggest using a Solo 401k to invest in our investments at least because you, if you have a self directed ira, you pay UDFI tax and UBIT tax. If you have a solo 401k, you only pay UBIT tax, you do not pay UDFI tax. Now there's a lot of details around that, but the gist of it in the summary is that with a self directed IRA, there's two forms of tax. With a solo 401k, there's one form of tax, so by definition it's going to be lower. So I hope that helps and talk to your CPA about exactly what the numbers are going to plan out for you. And then if you're looking to make an investment with one of those accounts, you can always ask the sponsor for a sample K1 for you to show your CPA. And so at Sugo Capital we have a lot of funds, so investors ask this all the time. And actually in our data rooms we just have the tax documents in there so you can pull it down, download it and give it to your CPA and say, hey, you know, am I investing with this entity or that entity or this retirement plan or that one? What will my tax consequence be? So we try to make it really easy for you. Hope that helps. And good luck doing what you can to execute a nice tax saving strategy in the next couple weeks.
