What are the rules of a self-directed IRA?

Self-directed IRA rules are set by the IRS under the Internal Revenue Code and apply to all self-directed accounts regardless of which custodian holds them. Understanding these rules is not optional. A rule violation, even an accidental one, can be catastrophic for your retirement account.

The first category of rules governs contributions. Annual contribution limits for 2026 are $7,000 for investors under 50 and $8,000 for those 50 and older. Self-directed IRA income limits apply to Roth accounts. For self-directed SEP IRA accounts, contributions can go up to 25 percent of compensation or $69,000, whichever is less.

The second category governs prohibited transactions. Self-directed IRA prohibited transactions are defined under IRC section 4975 and prohibit deals between your IRA and disqualified persons. The disqualified person list includes you, your spouse, your lineal ascendants and descendants, their spouses, and entities controlled by any of these individuals. The rules also prohibit self-dealing, which means using IRA assets for personal benefit in any form.

Self-directed IRA real estate rules add specific requirements for property ownership. Title must be held in the custodian’s name for the benefit of your IRA. All expenses must be paid from IRA funds. All income must flow directly to the IRA. No disqualified person may personally use the property or receive compensation in connection with it.

Self-directed IRA distribution rules require that you begin taking required minimum distributions from traditional accounts at age 73. Roth self-directed IRAs have no required minimum distributions during the original owner’s lifetime.

Self-directed IRA rollover rules limit indirect rollovers to once per 12 months across all IRAs and require the rollover to be completed within 60 days.

Self-directed IRA tax filing requirements include filing Form 990-T if the account earns more than $1,000 in unrelated business taxable income, which can occur with leveraged real estate or active business investments.

IRS rules for self-directed IRAs also require annual fair market value reporting for alternative assets. BullioniteAssetGroup provides a comprehensive compliance checklist to every client so these requirements are never missed.