What is Unrelated Business Income Tax (UBIT) When Investing in Real Estate With a Loan?


In this video, John Bowens, Equity Trust’s National Education Specialist, answers the commonly asked question, “What is Unrelated Business Income Tax?” as it relates to an IRA borrowing money to acquire income-producing real estate.

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Unrelated business income tax (UBIT) is a special tax that an IRA has to pay when the IRA borrows money to finance a real estate acquisition.

The percentage of property financed determines the percentage of profits from that acquisition, or net profit, that is taxable.

The first $1,000 in gains is not subject to UBIT. Proceeds above the first $1,000 are filed and the IRA pays the applicable tax.

Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

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