Five Investments the IRS Prohibits in a Self Directed IRA

Five Investments the IRS Prohibits in a Self Directed IRA

While self directed IRAs offer many benefits, it’s important to understand what you can invest in and what you cannot. Otherwise, holding a prohibited investment may jeopardize your IRA’s tax-deferred status. Losing tax deferred status triggers immediate payment of taxes and substantial penalties and wipe out much of your hard earned gains.  This article focuses on the types of investments that you must avoid in order to preserve your IRA’s favorable tax status. Prohibited investments include:

1) Collectibles (art, wine/liquors/alcoholic beverages, coins, antiques, stamps and certain other kinds of personal property)

2) Stock in an S-corp

3) Metals (except for certain U.S. coins and bullion that the IRS does allow)

4) Insurance contracts

5) Precious gems

By understanding what you cannot invest in, self directed IRA investors can be more confident in what they can invest in. For more information on prohibited transactions, please visit Publication 590, Individual Retirement Arrangements (IRAs).

 

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