Self-Directed IRA UBIT Exposure Estimator

Quantify how unrelated business taxable income chips away at retirement returns. Enter leveraged income, deductible expenses, and the marginal trust bracket to calculate net UBTI after the $1,000 exclusion, the resulting federal and optional state taxes, and the cash that stays inside the IRA. Include the UBTI exclusion or a state rate when applicable so the projection mirrors your filing obligations.

Total gross income generated by debt-financed assets or operating businesses held inside the IRA.
Operating costs, depreciation, interest, and other deductions allocable to the leveraged income.
Marginal federal trust tax bracket expected to apply to taxable UBTI once the exclusion is exceeded.
Optional — defaults to $1,000.00 when blank, matching the IRS UBTI exclusion amount.
Optional — defaults to 0.00% when blank. Add if your state imposes trust tax on retirement accounts.

Educational illustration only. Confirm UBTI calculations, deductions, and filing requirements with your custodian and tax advisor.

Examples

  • Example 1 — $60,000.00 leveraged income, $10,000.00 expenses, 37.00% trust tax rate, $1,000.00 exclusion, 6.00% state tax ⇒ Net UBTI after expenses: $50,000.00 (USD) | Taxable UBTI after exclusion: $49,000.00 (USD) | Federal UBIT owed: $18,130.00 (USD) | State UBIT owed: $2,940.00 (USD) | Total UBIT due: $21,070.00 (USD) | Effective tax rate on UBTI: 42.14% | Net cash retained in IRA: $28,930.00 (USD)
  • Example 2 — $18,000.00 leveraged income, $3,500.00 expenses, 24.00% trust tax rate, exclusion left blank, no state tax ⇒ Net UBTI after expenses: $14,500.00 (USD) | Taxable UBTI after exclusion: $13,500.00 (USD) | Federal UBIT owed: $3,240.00 (USD) | State UBIT owed: $0.00 (USD) | Total UBIT due: $3,240.00 (USD) | Effective tax rate on UBTI: 22.34% | Net cash retained in IRA: $11,260.00 (USD)

FAQ

Does this calculation include depreciation deductions?

Yes. Add depreciation and other allowable deductions to the deductible expenses field so they reduce the net UBTI before taxes.

What if my plan files Form 990-T with credits?

Enter the net tax after credits in place of the standard trust rate or reduce the tax rate inputs to approximate the effect of available credits.

Can a Solo 401(k) use the same approach?

Solo 401(k)s also file Form 990-T for UBTI. Use the same inputs while substituting the applicable trust tax rate from your plan administrator.

How do I handle multiple leveraged assets?

Aggregate total leveraged income and expenses across assets so the calculator measures exposure at the account level before you prepare Schedule A of Form 990-T.

How do I incorporate UDFI from real estate leverage?

Multiply gross rental income by the debt-financed fraction from Schedule A and enter the result as leveraged income. Include related mortgage interest in deductible expenses to keep the ratio accurate.

Additional Information

  • UBIT applies when debt-financed income remains after deductions, so expenses directly reduce the taxable base before the $1,000 exclusion is applied.
  • The calculator models federal UBIT using your marginal trust bracket and optionally layers in a state trust tax if retirement plans owe taxes locally.
  • Effective tax rate compares total UBIT to post-expense net income, highlighting how leverage can compress after-tax yields.
  • Net cash retained equals net income after expenses minus total UBIT, showing what stays in the IRA for reinvestment.
  • Input figures assume USD but any currency works when income, expenses, and taxes share the same unit.
  • State rates vary widely; confirm whether your jurisdiction follows federal trust thresholds or offers exemptions for retirement plans.

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