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Self-Directed 401k FAQ: Can I use my Solo 401k funds to buy furniture for a real estate rental (AirBnb, VRBO)?
QUESTION:
We are getting ready to close on a property purchased with our Solo 401K and wanted to confirm that furniture can be purchased with funds from the Solo 401K. If you could point to the IRS rule that confirms this and other details that would be greatly appreciated. Thanks.
RESPONSE:
Investing retirement funds in short-term real estate rentals (AirBnb) is a relatively new investment category for retirement plans and is often viewed more as a business activity instead of a passive real estate investment activity. As a result, there is little to no specific IRS guidance on investing retirement funds in short-term real estate rentals (AirBnb) (note: this lack of regulatory guidance was noted in the 2020 Government Accountability Office report). Typically, retirement fund investors invest in real estate as a long-term investment with typical expenses such as property tax, building repairs, etc. where the tenants furnish the property and thus pay for such expenses. Moreover, investing retirement funds in short-term real estate rentals may trigger unrelated business income tax which is another reason that many retirement investors focus on long-term real estate rentals. https://www.mysolo401k.net/airbnbn-solo-401k-rental-income-ubit-considerations/
