Self-Directed IRA

Most financial institutions focus on traditional investments like stocks, bonds, and mutual funds—products they offer and manage. Because of this, many banks, brokerage firms, and even financial advisors don’t promote or discuss self-directed IRAs. A self-directed IRA lets you invest in alternative assets outside of Wall Street, which is why they’re often overlooked in mainstream retirement planning.

Yes. Small business owners and self-employed individuals can choose from several tax-advantaged retirement plans, including a SEP IRA, SIMPLE IRA, and solo 401(k). These accounts are designed to help you save for retirement while also offering potential tax benefits for your business.

Yes. In addition to a traditional IRA, you can also self-direct a Roth IRA, SEP IRA, SIMPLE IRA, individual 401(k), and even health savings accounts (HSAs) and education savings accounts (ESAs). These accounts offer the same tax advantages—with the added benefit of investing in alternative assets.

All income from SDIRA investments must flow directly into the IRA, and all expenses must be paid using funds from the IRA. Paying expenses personally and reimbursing yourself is considered a prohibited transaction.
If your SDIRA is partnered with other investors, income and expenses must be allocated based on each partner’s percentage of ownership in the investment.

No. A self-directed IRA gives you the option to invest in traditional assets like stocks—but its main purpose is to use alternative investments to build retirement wealth. Many SDIRA owners choose assets like real estate, private equity, precious metals, promissory notes, and oil and gas to diversify their retirement portfolios beyond Wall Street.

A checkbook IRA is a self-directed IRA structure that uses a single-member LLC to give the account holder direct control over investment decisions. The SDIRA funds the LLC, which opens a dedicated bank account—allowing the IRA-LLC owner to write checks directly from that bank account for investments without IRA custodian approval.
This structure enables faster transactions while keeping all investments and income within the tax-advantaged umbrella of the SDIRA. The LLC is owned by the IRA, so all gains remain tax-sheltered.

If your self-directed IRA lacks the funds to pay investment-related expenses, you have several options:
– Make an annual contribution, if you’re eligible, to help cover the shortfall.
– Use a non-recourse loan from a bank or third party (UDFI tax may apply).
– Partner with another investor who is not a disqualified person to share the cost.
These options must follow IRS rules, so talk with your Advanta IRA account manager before making a decision.

When your IRA partners on an investment, income and expenses are split based on ownership percentage. If your IRA owns 60% and the partner owns 40%, your IRA receives 60% of the income and pays 60% of the expenses. The partner is responsible for their proportional 40%.

– UBIT (unrelated business income tax) is a tax your self-directed IRA may owe if it earns income from certain types of business activities or from investments financed with debt.
– UDFI (unrelated debt-financed income) applies when your IRA borrows money to invest and earns income from that investment. The taxable portion is based on the percentage of the asset that was financed by debt.
– UBTI (unrelated business taxable income) applies to business income earned from IRA-owned companies that are not structured as C corporations.
Note: Qualified plans, such as an individual 401(k), are exempt from UBIT on UDFI.

Self-directed IRAs cannot invest in collectibles, antiques, or life insurance contracts. These assets are prohibited under IRS rules outlined in IRC Section 4975.
In addition to restricted assets, your SDIRA must also avoid prohibited transactions and cannot conduct business with disqualified persons, such as certain family members, fiduciaries, or entities you or other disqualified persons control.