Prohibited IRA Transactions – How you can Avoid Them
Self-directed IRAs are one of the most flexible investment methods currently available to the American public because they increase your investment possibilities while potentially providing access to a tax-free retirement nest egg. While this freedom is unquestionably liberating for both beginning and full-time investors, it does come with a number of rules that you should be aware of.
Today’s article focuses on the topic of prohibited IRA transactions that you’ll want to avoid in order to ensure your account remains tax and penalty free. For example, life insurance, art, alcoholic beverages, and collectibles are among the relatively small prohibited asset list. You should also be mindful of prohibited individuals.
For example, some prohibited IRA transactions might involve you, your spouse, your descendants, etc. lending or borrowing from your IRA. Another example of a prohibited transaction might include a situation where these individuals buy or sell assets to your IRA or staying overnight in a property owned by your IRA.
While these rules and regulations may seem restricting at first, they truly pale in comparison to the massive list of assets and transactions that are readily permissible. For example, your IRA can own an LLC, rent out a home, buy gold, or invest in the stock market. These possibilities are part of what makes a self-directed account such a pleasure to own!
Also note that once you turn 59½ years old, many of the restrictions are lifted. For example, if you bought a beachfront property with your IRA and you’ve passed 59½, you can now take a distribution of that asset and use it as a vacation home! A Roth IRA is an ideal vehicle for this strategy because of its tax free nature.
If you have any questions about opening a new IRA account, contact us at 1-866-7500-IRA(472). If you’d like to learn more about prohibited IRA transactions, contact us at 1-866-7500-IRA(472) or [email protected] or click here for more information.