The IRA was created to provide a new way in which people could save money for retirement. Through the years it has developed and increasingly become a better method in which to save. There have been a number of acts put in place which have assisted in its modernization.
1974 Employee Retirement Income Security Act (ERISA)
This act allowed an owner to contribute $1,500 of their yearly, taxable income at most. However, such an account could only be had if you were not already using a plan provided by your employer. You also needed to keep the money in the account until the age of 59.5 years in order to benefit from non-penalized distributions. Such distributions would then be required to be taken out in addition to your other income beginning at the age of 70.5 years.
1981 Economic Recovery Tax Act
The main change was that if you were aged under 70.5 years old you would now be able to put money into an IRA. Another development was that even if you were already involved in a plan with your employer you could still open up an IRA. Also, the amount you could place into your IRA was increased from $1,500 to $2,000. In addition, if a spouse was not working or stayed at home an extra $250 could be added by the working partner into the account.
1986 Tax Reform Act
Now, if you wanted to have deductions on your yearly $2,000 IRA amount you needed to be part of an employment plan and be earning under a particular amount. This also applied to spouses who were ensured under such a plan. If you were married and filed under a joint tax return then the limit was $50,000 and for unwed individuals it was $35,000.
1996 Small Business Job Protection Act
This act was brought about due to the fact that homemakers were being left out. To counteract this, the spousal IRA figure was raised from $250 up to $2,000. Therefore, couples could not only save almost two times what they could previously but could also receive a larger tax deduction.
1997 Taxpayer Relief Act
This year saw the introduction of the Roth IRA. Through this, no tax deductions were necessary however the account allowed for tax free growth. In terms of income caps, these were changed for both forms of IRA: under $40,000 for non-married people and under $160,000 for married couples already covered by their employee.
2001 Economic Growth and Tax Relief Reconciliation Act
This allowed those aged over 50 years old to pay up to the limit of $6,000 per year into both forms of IRA.
The non recourse loan
One growth opportunity for IRA assets is the purchase of real estate within the account. As is often the case, a loan can prove vital in purchasing property. A non recourse loan has been the only way in which individuals can borrow money for their IRA. The reason behind this is because non recourse lending means that if you default on your loan your lender can only take your property and no further assets: the non recourse loan is in the name of your IRA so you are not personally liable. Such loans not only allow for better leverage for your IRA but a higher form of security.
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