With all the legislative changes related to retirement distributions over the last couple of years, it’s important to have a clear understanding of what to expect for the current year. In particular, it’s critical to know what to expect with Required Minimum Distributions (RMDs) for tax year 2021.
RMDs are required distributions investors over a certain age must take out every year from their retirement savings accounts.
As part of the SECURE Act of 2019, the age when RMDs are required was increased from 70 ½ to 72 years. Furthermore, as part of the CARES Act passed in 2020, the RMD requirement was temporarily waived. So, what should you expect for 2021?
Unfortunately, there is no longer an RMD waiver for tax year 2021. Therefore, anyone age 72 or older as of December 31, 2021 must take their RMD by year-end to avoid a penalty. The only exception to this is if 2021 is the first year an individual is subject to the RMD requirement, in which case the due date is April 1, 2022. The RMD rules apply to traditional IRAs, inherited IRAs, and employer-sponsored plans.
For inherited IRAs, the RMD rules for beneficiaries depend on when the original owner passed away as well as the type of beneficiary. While non-spouse beneficiaries are generally required to withdraw the entire account balance of the inherited IRA within 10 years, spousal and other certain eligible beneficiaries may be allowed to take RMDs over their life expectancy. The taxation of the distributions depends on the type of account – no taxes will be owed on inherited Roth IRA distributions (assuming the original account owner held the account for at least five years), while distributions from an inherited traditional IRA account would be subject to taxation.
It is important to understand the various rules surrounding RMDs to avoid the steep 50 percent penalty that kicks in if you don’t comply with the rules and/or handle your distributions accurately. But what if you don’t need the funds? While you are still required to take the distributions when you meet the requirements, there are some options available if you don’t depend on the money to meet your spending needs, including reinvesting the proceeds in another allowable account (to take advantage of continued growth) or taking qualified charitable distributions (QCDs) that allow for gifting of up to $100,000 annually to a qualified charity (the latter of which are excluded from your taxable income and not subject to tax).
Be sure to work with a tax or financial professional so you know what to expect and can plan withdrawal strategies that put you in the best situation possible!
Serious real estate investors don’t rely on intuition—they rely on structured financial strategy to drive decisions and scale efficiently.
Most investors think a property is profitable if: Rent > Mortgage That’s dangerously wrong.
Bad bookkeeping doesn’t show up as an obvious expense. It shows up as: Missed opportunities Overpaid taxes Bad decisions
At some point, your business stops being “simple.” And your bookkeeping setup? It quietly starts breaking.
Taxes are your largest expense as a real estate investor. The difference between average and elite investors? Strategy. Not income.
Most real estate investors don’t lose money because of bad deals. They lose money because they don’t actually know their numbers. And not in a surface-level “I check my bank account” way— but in a true, decision-making, portfolio-optimization way. This single mistake quietly drains cash flow, increases taxes, and prevents scaling. Let’s break it down
If you own between 5–50 rental units, your biggest financial risk isn’t the market—it’s poor tax strategy and bad books.
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Ordinary Income: Ordinary income from investments includes interest, dividends, and rental income. Let's briefly explore each: Interest: If you earn interest from investments like savings accounts, certificates of deposit (CDs), or bonds, that income is generally taxable. It is typically taxed at your ordinary income tax rates, which vary based on your income level. Dividends: Dividends are a company’s earnings distributions to its shareholders. They can be classified as either qualified or non-qualified dividends. Qualified dividends, which meet specific criteria, are subject to lower tax rates similar to long-term capital gains. Non-qualified dividends are typically taxed at ordinary income tax rates. Rental Income: If you invest in real estate and receive rental income, it is generally considered ordinary income and is subject to taxation at your applicable tax rates. However, you may be able to offset this income with eligible expenses, such as mortgage interest, property taxes, depreciation, and maintenance costs. Capital Gains: Capital gains occur when you sell an investment for a profit. The taxable portion of capital gains can be further divided into short-term and long-term gains: Short-Term Capital Gains: If you hold an investment for one year or less before selling it, any profit you make is considered a short-term capital gain. Short-term capital gains are taxed at your ordinary income tax rates. Long-Term Capital Gains: Investments held for more than one year before being sold may qualify for long-term capital gains treatment. At the federal level, the tax rates for long-term capital gains are generally lower than ordinary income tax rates and vary based on your income level. At the state level, while a handful of states tax such gains at a lower rate than the state ordinary income tax rates, most states tax all income, regardless of type, at the same rate. Net Investment Income Tax: In addition to regular income taxes, certain high-income individuals may be subject to the Net Investment Income Tax (NIIT). The NIIT is a 3.8% federal tax on the lesser of your net investment income or the excess of your modified adjusted gross income (MAGI) over a specific threshold: • For single or head-of-household filers, the threshold is $200,000. • For married couples filing jointly, the threshold is $250,000. Net investment income includes interest, dividends, capital gains, rental income, royalties, and passive income from businesses. It is essential to consult with a tax professional to determine if you are subject to the NIIT and how it may impact your tax liability. Strategies to Minimize Investment Income Taxes: While taxes are a necessary part of investing, there are strategies you can employ to minimize their impact: Tax-Advantaged Accounts: Consider investing in tax-advantaged accounts like individual retirement accounts (IRAs), 401(k)s, or Health Savings Accounts (HSAs). These accounts offer tax benefits that can help reduce your overall tax liability. Tax-Loss Harvesting: If you have investments that have decreased in value, you can sell them to offset capital gains from other investments. This strategy, known as tax-loss harvesting, can help reduce your taxable income. Holding Periods: By holding investments for more than one year, you may qualify for the lower long-term capital gains tax rates. Donating Stocks to Charity : By directly donating appreciated stock (that has been held long-term) to charity, you don’t have to recognize a taxable capital gain, but you can still receive a charitable contribution deduction for the fair market value of the stock (if you itemize deductions). This allows for a much greater tax benefit than if you sell the stock and then donate the funds, because you will pay capital gains tax on the gain from the sale!
What Are Cryptocurrency Taxes? Cryptocurrency taxes are the taxes that you owe on any gains or losses that you realize from the sale or exchange of virtual currencies. The IRS treats cryptocurrencies like property, which means that any gains or losses you generate are treated as capital gains or losses (just like when you sell stocks, real estate, or other capital assets). How Do Cryptocurrency Taxes Work? Cryptocurrency taxes work similarly to other capital gains taxes. If you sell or exchange cryptocurrency at a profit, you'll owe taxes on that profit. If you sell or exchange it at a loss, you may be able to deduct that loss to reduce your overall tax liability (although there are certain limitations when claiming capital losses). The amount of tax you owe on your cryptocurrency gains depends on how long the cryptocurrency has been held since the initial acquisition - if you own it for less than a year, your gains will be considered short-term and taxed at your ordinary income tax rate. If you hold it for more than a year, however, your gains will be taxed at the long-term capital gains tax rate, which is generally lower than the ordinary income tax rate. What Do You Need to Do to Comply with Cryptocurrency Tax Laws? If you've invested in cryptocurrency, it's important to understand how to properly report your gains and losses on your tax returns. Here are some steps you can take to ensure that you abide by the law: • Keep Accurate Records - The first step is to keep precise records of all your cryptocurrency transactions. Keeping track of the gain or loss from virtual currency trading is easy if you are using a broker that issues you Form 1099-B (Proceeds from Broker and Barter Exchanges). However, if you don't use a broker who keeps records of your trading activity, you will need to do so on your own. This means that you must keep track of the following: •Purchase Date •Purchase Price •Sale Date •Sale Price Don't forget that sales aren't the only form of taxable transactions. You must report the disposition of a virtual coin if it's sold for cash, traded for another cryptocurrency asset, or used to buy something. It's also important to note that virtual currency splits can create ordinary income, as can airdrops, mining, and staking. • Report Your Gains and Losses on Your Tax Return - When you prepare your tax return, you'll likely need to report your cryptocurrency gains and losses on Form 8949, Sales and Other Dispositions of Capital Assets. You'll also need to include the total amount of your gains or losses on Schedule D of your tax return. • Pay Any Taxes Owed - If you owe taxes on your gains, you'll need to pay them when you file your tax return (and they will be included in your overall tax liability on ALL taxable income). If you don't pay your taxes on time, you may be subject to penalties and interest charges. Conclusion As cryptocurrency continues to become a more popular investment vehicle, it's important to understand how to properly keep track of and report your gains and losses on your tax returns. The IRS is cracking down on these types of transactions, and you don’t want anything to come back and bite you later! As always, if you're unsure how this applies to your specific tax situation, please consult with a tax professional.