“Lief, as a subscriber to your Simon Letter, I am thinking of purchasing a condo in Panama through my self-directed IRA. This will allow me not to pay U.S. income taxes on the rent payment and allow them to grow in the IRA tax-free. Since the property would be in Panama, would I have to pay Panama income tax each year even though it is in the IRA? If so, is there a way to avoid this?
“Love your letter.”
–Don L., United States
Unfortunately, you would pay taxes on the rental income in Panama. However, you are allowed deductions similar to those in the United States (for depreciation, management expenses, utilities, etc.). So the reality is that you probably wouldn’t pay much if anything in taxes in Panama.
One thing to remember is that, if you purchase using IRA funds, you can’t use the property personally. If your idea is to buy a vacation home, this won’t work under IRS rules.
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