Where can I find information on calculating UBIT or UDFI? – American Estate & Trust

Calculating Unrelated Business Income Tax (UBIT) and Unrelated Debt-Financed Income (UDFI) can be complex, but understanding the process is crucial for maintaining compliance with IRS regulations when managing a Self-Directed IRA (SDIRA). The IRS provides resources and worksheets to assist in these calculations.

1. IRS Publications:

Publication 598: Tax on Unrelated Business Income of Exempt Organizations
This publication provides detailed guidance on UBIT, including definitions, exceptions, and how to calculate UBIT. Although it is aimed at exempt organizations, it is also informative for SDIRA account holders.
Access Publication 598 here.
Instructions for Form 990-T
These instructions are critical for filing Form 990-T, which is required for reporting UBIT or UDFI. It includes detailed steps for completing the form and calculating the taxes owed.
View the instructions for Form 990-T here.

2. IRS Webpages:

Unrelated Business Income Tax (UBIT)
The IRS provides an overview of UBIT, detailing when it applies and how to calculate it.
Learn more about UBIT on the IRS website.
Unrelated Business Income from Debt-Financed Property under IRC Section 514
This resource explains the rules surrounding UDFI, including how to calculate the income subject to tax.
Read more about UDFI calculations here.

3. Official IRS Worksheets:

UBIT Calculation Worksheet
Although the IRS does not offer a specific online calculator for UBIT or UDFI, the IRS does provide forms that you will use for reporting these taxes, and these forms have built-in worksheets to help you organize and calculate UBIT or UDFI.
Access IRS Form 990-T here.

4. Professional Assistance:

Given the complexities involved in calculating UBIT and UDFI, it is highly recommended to consult with a tax professional or financial advisor who specializes in SDIRA regulations. They can provide personalized advice and ensure compliance with all applicable tax laws.

Conclusion:

While the IRS provides foundational information on UBIT and UDFI, utilizing their official publications and worksheets will help you navigate these calculations. If needed, seek professional advice to ensure you meet all IRS requirements and accurately report these taxes.