Rules For A Self Directed IRA

Although all IRAs are “self directed” to some extent, there are a number of key differences between the rules for an actual Self Directed IRA and a Regular IRA.

General Rules for Self Directed IRA

While all IRA accounts can be managed by their owner – the extent of this management and choice of assets will differ widely.

Regular IRAs offer limited investment options chosen by the custodian. Self-managed IRAs allow broader asset selection, including stocks, bonds, and mutual funds.

Regular IRA

Investors can trade within allowed assets, while the IRA provider manages day-to-day tasks and may offer advice.

A Self-Directed IRA (SDIRA) offers extensive investment control and a wider asset range than regular IRAs. Account holders have flexibility but must adhere to IRS constraints.

Self Directed IRA

Avoiding prohibited assets and transactions. SDIRA custodians provide options within their acceptable investments, requiring careful compliance to prevent tax consequences and penalties.

Because the IRS will allow almost any investment into a self directed IRA it’s far easier to list the investments not allowed.

#1: Prohibited Assets

Collectibles in IRS publication 590-1 include artwork, rugs, antiques, metals (with exceptions), gems, stamps, coins (with exceptions), and specific tangible personal property.

Prohibited transactions in a self-directed IRA involve improper use by the account owner, beneficiaries, or disqualified persons, such as family members.

#2: Prohibited Transactions

Examples include borrowing from or selling property to the IRA. Engaging in these transactions results in harsh penalties, including taxation and a 10% early distribution penalty.

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