Unrelated business income is any continual and consistent income derived within your IRA that is not necessarily related to the retirement account’s purpose. In the eyes of the IRS, businesses owned by tax-advantaged accounts should incur some tax liability—just as businesses not owned by IRAs do.
If your self-directed real estate IRA transactions incur UBIT, IRA funds are used to pay the tax and may not be paid by you personally. Rents, interest, and dividends received from investments are NOT subject to UBIT, but income from other sources could be subject to UBIT.
Your IRA may owe UBIT if:
As the calculation process can be somewhat complicated, it is important that you consult with a tax professional to determine UBIT liability related to your self-directed IRA. For more in-depth information, review IRS Publication 598.