Here are few tips about how you can shelter some of these profits:

A lot of people lessen the importance taxes have on real estate profits due to the reduced tax rate given to long-term capital gains, but that is only part of the story. If you purchase and sell a property within a twelve-month time period, you will have to pay taxes on profits at levels as high as 35%. Ouch - 35% of your return on investment could disappear!

What can you do to eliminate this tax burden?

How about making your investments inside a taxexempt trust? In particular, a trust that most of us refer to as an Individual Retirement Account, or IRA.

The most common misconception about IRAs is that they are just a different type of brokerage account, limited to investments in stocks, mutual funds, bonds, annuities, etc. That is simply not true. By definition, an "individual retirement account means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries." My intention is not to bore you with IRS codes or technical jargon, but to leave you with a clear and simple message. An IRA is merely a trust that, when created properly, can be used to accumulate wealth for retirement.

Let's walk through a simple example: You have $150,000 inside your IRA account, and you're sick and tired of losing money in the stock market. You decide to open a self-directed IRA and choose to have your IRA invest in a land deal in Coolidge, Arizona. Eight months go by and you find a buyer for your parcel for $225,000. Your IRA sells the property and creates a $75,000 profit on the investment.

How much do you have to pay Uncle Sam in taxes on the $75,000 profit within your account? Zero, zilch, nada, nothing!

You also do not have to worry about doing a 1031 exchange since your IRA is already a tax-exempt entity. Exciting? I tend to think so.

The above example provides a very basic understanding of the power and flexibility your IRA account can have if it is truly self-directed. In future articles, we will be delving into all the fine details, as well as other examples on how you can begin to self-direct your future by making investments in real estate!

To learn more about self-directed retirement plans, visit www.entrusttampa.com

(The above article was adapted from an article written by J.P. Dahdah, President of Entrust Arizona)