Hi Mat & Mark (in that order),
Thank you for educating and paving the way for us all to reach our American dream. Your podcast should be a staple at every high school!
You often talk about the benefits of marrying a spouse that qualifies as a real estate professional. I was wondering if you can recommend the same for military spouses (My husband and I served and continue to serve for the last 10 years and counting).
I am not sure how familiar you are with combat zone exemptions. Military members that serve in what has been designated a combat zone do not get taxed on their W2 wages that were earned in a combat zone. In addition, I believe the per diem and housing allowances are also not taxed. Meaning, a combat zone deployment is a great time to load up your Roth accounts (TSP is the custodian for all military members).
There is also an exemptions that increases the annual limits for retirement contributions to ~$57K. I do not understand this exemption well and hope you can expand. Is is this a particular account (traditional vs roth), does that include employer (government/military) match, and limited to just income earned from the military or this limit can also apply to retirement savings from a private employer.
With these perks my plan is the following on my next combat deployment:
- max out Roth contributions while in a combat zone in my military plan
- max out any other contributions from my non military job to meet the annual max (roth or traditional especially if they match)
- convert all my previous retirement accounts to roth (since my taxable income for the year will be lower than most years)
- when my husband and I are 5-7 years from retirement, buy a “dream” property in our Roth. Rent till age 60, deed to ourselves and live as primary residence
- on this last point, am I correct that there is no depreciation recapture to worry about since the property was purchased in a Roth, since I would never take depreciation to begin with? What about if the property was purchased entirely or partially by a traditional account? Is, and if so, how is depreciation recaptured?
- Lastly on same point, would it be better to remodel the property before deeding it to ourselves or prior to (while its still a rental)? Would it matter if the rehab money comes from the retirement (as business expense paid by “checkbook IRA”) or from personal funds?
Hope this gave you some food for thought and shed some light on the retirement topic for your military listeners.
Appreciate everything you do.
-Can do since '42