One of the most appealing aspects of a self-directed IRA is the overall flexibility in regards to the investments that can be made within the IRA. While it is true that self-directed IRAs do allow for investing in real estate, gold, silver, and so much more, there are limitations as with anything else. Knowing these limitations and staying within the legal bounds of a self-directed IRA are crucial so you can ensure your maximum benefits are realized and not compromised.
Don’t Get Personal
Even though you can invest in real estate with a self-directed IRA you can’t do so if you have any interest in the property already. So, you can’t simply have your self–directed IRA buy a raw lot that you own or a house that you own. In the same regard, you can’t buy a piece of commercial property or residential property and then work or live there.
Don’t Keep it in the Family
A big mistake that many make is thinking they can circumvent the rules by getting their family involved. However, just as you can’t do certain thing in regards to your self-directed IRA, your family can’t either. This includes lending money to family members or family members’ businesses in any way. It’s best to treat your family as you would yourself.
How Do You Know?
Basically you can’t do anything that the IRS would consider as self-dealing. If you have the slightest doubt about whether or not an investment will be okay in the eyes of the IRS you should first check it out.
Everything you need to know is spelled out by the IRS in the Internal Revenue Code sections 408 and 4975. These prohibited practices are not to be ignored as the last thing you want is the wrath for the IRS coming down on you and your self-directed IRA. You can always learn more by visiting IRS.gov or calling the IRS toll free.
Alternative Not Unlimited
A self-directed IRA will allow you to invest in a number of alternative investments. This includes real estate of all kinds, tax liens, gold, silver, and more, but that doesn’t mean the investments are unlimited. A good rule of thumb is to keep yourself and your family out of the investment equation and stick to investments that won’t have the kind of conflict of interest that the IRS will not approve.
Don’t be confused, get educated. Call 877-339-4559 now to learn more about personal use limitations with your self-directed IRA.