Self Directed IRA Rules

Knowing the rules of a self-directed IRA (SDIRA) is the bedrock of investing success because it empowers you to maximize opportunities. Understanding what assets are allowed and how to avoid prohibited transactions ensures your investments remain compliant with IRS regulations. An SDIRA is a powerful tool to help you diversify your portfolio with alternative assets and still take full advantage of the tax benefits an IRA provides, laying a strong foundation for financial growth.

Prohibited IRA Investments

  • Artwork

  • Rugs and Antiques

  • Alcoholic Beverages

  • Life Insurance Policies

  • Metals* and Gems

  • S Corporation Stock

  • Stamps and Coins*

*Your SDIRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium and platinum bullion.

These restirctions are detailed in Internal Revenue Code Section 408(m)

Disqualified Individuals

In an SDIRA, disqualified persons are individuals or entities prohibited from engaging in certain transactions with the IRA to avoid conflicts of interest or self-dealing. According to IRS rules, disqualified persons include:

-The account holder (you)

-Immediate family members including: your spouse, children, parents, and their spouses (but not siblings or extended family).

-Business entities where you or a disqualified person own 50% or more, directly or indirectly.

-Fiduciaries and anyone providing services to the IRA (financial advisors, custodians, CPA etc.)

Grandparents

Parents

Children

Grandchildren

Business Entity

You

Fiduciary

Prohibited Transactions

Per IRS guidelines, there are some types of Transactions you need to avoid:

SDIRA rules state that all investments must be at arm’s length. This simply means you can’t personally benefit from an asset owned by the IRA. In other words, the IRA is for you in retirement and is not invested to benefit you now.

Examples Include:

Self Dealing: buying or selling property between you and your SDIRA

Personal Use of IRA-Owned Assets: Personally using or benefiting from an asset held by the SDIRA. You can not use real estate purchased through your IRA as a personal residence, vacation home, retirement home or office space.

Receiving Personal Benefit From or Providing Services To Your IRA: You can’t lend yourself or an other disqualified person money from your IRA. Also, you can’t pay yourself, a company you own, or any other disqualified person to do work on an investment owned by your IRA.

Revenue and Expenses: Remember all expenses related to any investment need to be paid from the IRA. Additionally, all profits produced by the investments must return to the IRA. Example: Your IRA owns a rental property, all revenue, like rent, must return to the IRA; all expenses like renovations, maintenance and taxes must be paid by the IRA directly