Frequently Asked Questions

A Self Directed IRA is a retirement account that allows you to choose from a broader range of investments beyond traditional brokerage offerings. While you direct the investments, the account must still be administered by a custodian and follow IRS rules.

The account receives the same tax benefits as a traditional or Roth IRA. The key difference is the expanded investment options and your ability to select them.

The main difference is investment flexibility. A regular IRA at a brokerage limits you to investments that broker offers (stocks, bonds, mutual funds). A Self Directed IRA custodian allows you to invest in a wider range of assets permitted by the IRS.

Tax treatment, contribution limits, and distribution rules are the same. The structure is the same. Only the range of allowable investments differs. You can review current contribution limits separately.

Costs vary by custodian but typically include:

• One time setup fee: $50 to $300
• Annual account fee: $100 to $400
• Transaction fees: $50 to $150 per investment
• Asset holding fees: May apply for certain investments like real estate or precious metals

These fees are generally higher than traditional IRA fees due to the additional administration required for alternative assets.

Yes. You can transfer or roll over funds from existing retirement accounts including Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and eligible 401(k) plans.

Direct trustee to trustee transfers are not taxable events and are generally the safest method.

You can invest in many asset types permitted by the IRS, excluding certain prohibited categories such as collectibles and life insurance. Common investments include:

• Real estate (residential, commercial, raw land)
• Precious metals (gold, silver, platinum, palladium that meet IRS standards)
• Private businesses and startups
• Private lending and promissory notes
• Tax liens and deeds
• Cryptocurrency (if custodian allows)
• Stocks, bonds, and mutual funds
• Limited partnerships and LLCs

The IRS prohibits certain asset types and transactions. Prohibited investments include collectibles and life insurance. Examples of collectibles include:

• Artwork
• Rugs and antiques
• Gems and most jewelry
• Stamps and most coins (with limited bullion exceptions)
• Alcoholic beverages
• Certain other tangible personal property

Additionally, prohibited transactions with disqualified persons are not allowed and can disqualify the entire IRA. You can review those rules in more detail here: Prohibited Transactions.

Yes, cryptocurrency can be held in a Self Directed IRA if the custodian or structure allows it.

The IRA must own the asset directly or through a compliant structure. You cannot personally take possession of the crypto. Proper custody and reporting are critical for compliance.

A prohibited transaction is any improper use of your IRA that benefits you or a disqualified person. Examples include:

• Selling property you own to your IRA
• Using IRA owned property for personal benefit
• Receiving compensation from IRA investments
• Using your IRA as collateral for a personal loan
• Transacting with disqualified persons

Penalties are severe and can result in the entire IRA becoming taxable.

Disqualified persons include:

• You (the IRA owner)
• Your spouse
• Your lineal ascendants (parents, grandparents)
• Your lineal descendants (children, grandchildren)
• Spouses of your lineal descendants
• Entities you control 50% or more
• Fiduciaries of the IRA

Siblings, aunts, uncles, and cousins are generally not considered disqualified persons.

No. You cannot personally use or benefit from IRA owned property under any circumstance.

Any personal use is considered a prohibited transaction, even if minimal or temporary. For a deeper real estate example, see Rental Property.

No. You cannot provide services to IRA owned assets.

All work must be performed by third parties and paid for by the IRA. You may direct decisions but cannot perform labor.

Yes, but only non recourse financing. The lender’s only remedy is against the property itself, not you personally.

These loans typically require larger down payments and higher interest rates, and you cannot personally guarantee the loan.

UDFI (Unrelated Debt Financed Income) applies when your IRA uses debt to acquire an investment.

A portion of income and gains attributable to the financed percentage may be taxable. The calculation is based on the average acquisition indebtedness relative to the property’s basis, not always a simple fixed percentage.

Your IRA may be required to file Form 990-T and pay tax from IRA funds. For a fuller breakdown, read Understanding UDFI.

Generally no. If you own or control the business, it is considered a disqualified person.

Transactions between your IRA and a disqualified person are prohibited, even if terms are market rate.

Self Directed IRAs follow the same tax rules as traditional IRAs:

Traditional SDIRA: Contributions may be tax deductible. Investments grow tax deferred. Distributions are taxed as ordinary income.

Roth SDIRA: Contributions are made with after tax dollars. Investments grow tax free. Qualified distributions are tax free.

However, certain investments may trigger taxes inside the IRA, such as UBIT or UDFI.

You can take distributions at any time, but penalties may apply:

• Before age 59.5: 10% penalty plus income tax (Traditional IRA)
• After age 59.5: No penalty (Traditional IRA still taxed)
• Roth IRA: Contributions can be withdrawn anytime; earnings require 5 years and age 59.5

Traditional IRAs require minimum distributions beginning at age 73 under current law.

The amount is based on IRS life expectancy tables. If your IRA holds illiquid assets, planning ahead is critical to meet distribution requirements.

Roth IRAs do not require distributions during the original owner’s lifetime.