An IRA can hold almost any asset you can think of. Federal tax law names only two things an individual retirement account is forbidden to own — life insurance contracts and collectibles — and leaves everything else on the table.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts So the real answer to what an IRA can invest in is: stocks, bonds, mutual funds, ETFs, CDs, annuities, real estate, private company shares, promissory notes, cryptocurrency, and qualifying precious metals, provided you use a custodian willing to hold the asset and you don’t run afoul of the prohibited transaction rules. The reason most people believe IRAs are limited to publicly traded securities is that major online brokerages only offer those products. That’s a business decision by the broker, not a limit in the tax code.
Standard Investments at Any Brokerage
The conventional menu covers what most IRA holders ever need. Shares of publicly traded companies, corporate and government bonds, mutual funds, and exchange-traded funds all fit in any IRA at any major brokerage. These assets price in real time on national exchanges, and moving in or out takes seconds.
Certificates of deposit and money market funds serve investors who want predictable returns on part of the portfolio, often closer to retirement. Fixed and variable annuities also qualify, though their fee structures deserve a hard look given that the IRA wrapper already provides tax deferral.
Alternative Assets Through a Self-Directed IRA
“Self-directed IRA” is not a special account type recognized by the IRS. It’s an industry term for an IRA held at a custodian willing to process investments beyond standard securities. Those custodians handle paperwork, hold title on behalf of the account, and file required reports, but they generally don’t evaluate the merits of any investment. Due diligence is entirely on you.
Real Estate
Real estate is the most common alternative IRA holding. Your account can buy residential rental properties, commercial buildings, raw land, and tax lien certificates. The IRA takes title, collects all rental income, and pays every expense. Property taxes, insurance, maintenance, and repairs must come from IRA funds, never from your personal bank account. Paying a property bill out of pocket is treated as a prohibited transaction and can disqualify the whole account.2Internal Revenue Service. Retirement Topics – Prohibited Transactions
If the IRA needs financing, the loan must be non-recourse, meaning the lender’s only collateral is the property itself. You cannot personally guarantee the debt, because a guarantee between you and your IRA would itself be a prohibited transaction. Non-recourse loans are harder to find and typically require larger down payments than a standard mortgage.
Private Equity and Promissory Notes
An IRA can buy shares in private companies that don’t trade publicly, fund startup ventures, or participate in private placements. Promissory notes work too: the IRA lends money and receives interest, functioning as a private lender. The borrower cannot be you or any other disqualified person, but outside that limit the IRA is free to make the loan.
Precious Metals
Gold, silver, platinum, and palladium qualify, but only when they meet the purity thresholds tied to commodity exchange delivery standards.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts In practice, gold must be at least .995 fine, silver .999, and platinum and palladium .9995. Certain U.S.-minted coins are named directly in the statute, including American Gold Eagles, Silver Eagles, and Platinum Eagles. Bullion has to sit with an IRS-approved trustee. Your home safe doesn’t count.
Cryptocurrency
The IRS classifies cryptocurrency as property, a position set in Notice 2014-21.3Internal Revenue Service. Frequently Asked Questions on Virtual Currency Transactions Nothing in the tax code stops an IRA from holding property generally, so Bitcoin, Ethereum, and other digital assets can be held inside a self-directed IRA. The custodian manages private keys and custody. Starting in 2026, expanded reporting kicks in through Form 1099-DA. Prohibited transaction rules still apply, so you cannot transfer crypto you already own personally into the IRA, and the IRA cannot transact with you or your family.
Checkbook Control Through an LLC
Some investors form a single-member LLC owned entirely by their IRA. The IRA funds the LLC, the LLC opens a bank account, and the investor gains check-writing ability to move quickly on deals without routing every transaction through the custodian. The structure is legal. It also concentrates every compliance risk on the account holder. One personal purchase or family transaction run through the LLC can disqualify the entire IRA.
What an IRA Cannot Hold
Collectibles
The tax code defines collectibles broadly: artwork, rugs, antiques, gems, stamps, most coins, and alcoholic beverages all qualify.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts If your IRA buys one, the IRS treats the purchase price as a distribution to you in the year of the purchase. Income tax applies, plus the 10% early distribution penalty if you’re under 59½.4Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements (IRAs) The precious metals and specifically named coins are carved out as exceptions. Nothing else on the collectibles list is.
Life Insurance
An IRA cannot use its funds to buy life insurance contracts. The prohibition sits directly in the statute governing IRA trust requirements.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
S-Corporation Stock
S corporations may only have individuals, certain trusts, and specific tax-exempt organizations as shareholders. IRAs don’t fit any of those categories. There’s one narrow exception for shares in an S-corp that is a bank holding company, and only for shares held as of the date that provision was enacted.5Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined If you’re looking at a private company organized as an S-corp, your IRA cannot invest.
Prohibited Transactions Can Undo the Whole Account
Knowing what asset classes are allowed matters less than knowing who your IRA can transact with and how. This is where self-directed IRA holders actually get hurt.
A prohibited transaction is any direct or indirect deal between your IRA and a “disqualified person.” Your IRA cannot buy from, sell to, lend to, borrow from, or provide services or assets to any disqualified person.6Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions Buying property for your own present or future personal use with IRA funds is also explicitly barred.2Internal Revenue Service. Retirement Topics – Prohibited Transactions
The list of disqualified persons is wider than most people expect:
- You, the IRA owner
- Your spouse
- Your parents and grandparents
- Your children, grandchildren, and their spouses
- Your IRA’s fiduciary, meaning the custodian, administrator, or anyone with authority over the account
- Service providers to the IRA, such as accountants, attorneys, and investment advisors
- Any entity more than 50% owned or controlled by any person on this list
Siblings, aunts, uncles, and cousins are absent from the list, so transactions between your IRA and those relatives are not automatically prohibited.6Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions
The consequences are severe. If you trigger a prohibited transaction at any point during the year, the IRA stops being an IRA as of January 1 of that year. The entire fair market value is treated as distributed to you on that date, and every dollar above your basis becomes taxable income.4Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements (IRAs) If you’re under 59½, add the 10% early distribution penalty on the taxable portion.7Internal Revenue Service. Substantially Equal Periodic Payments The disqualified person who participated in the transaction also faces an excise tax of 15% of the amount involved, rising to 100% if the transaction isn’t corrected.6Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions
Concretely: if your IRA owns a rental house worth $300,000 and you personally pay $2,000 to fix the roof, you may have triggered a deemed distribution of the entire account. That $300,000 hits your taxable income, plus the 10% penalty if you’re under 59½, plus the excise tax. A $2,000 repair can cost six figures in taxes.
Taxes the IRA Itself May Owe
Most IRA income grows tax-deferred, but alternative assets can trigger taxes at the account level. Two categories catch investors off guard.
Unrelated Business Income Tax. If your IRA actively operates a business rather than passively holding investments, the income may be subject to UBIT. An IRA that generates $1,000 or more in gross unrelated business income has to file Form 990-T and pay the tax from IRA funds.8Internal Revenue Service. Unrelated Business Income Tax The tax uses trust and estate brackets, which compress quickly. In 2026, income above $3,300 is taxed at 24%, above $11,700 at 35%, and above $16,000 at 37%.9Internal Revenue Service. 2026 Form 1041-ES Those rates are far steeper than individual brackets at the same income levels.
Unrelated Debt-Financed Income. UDFI is the trap specific to leveraged IRA real estate. When the IRA uses a non-recourse mortgage to buy a rental, the share of income attributable to the borrowed money is taxable. If the IRA puts 50% down and finances the rest, roughly half of net rental income and half of any gain on sale is subject to UBIT at trust rates. The IRA pays this directly using its own funds and its own tax ID; it does not flow to your personal return. Paying off the mortgage at least twelve months before selling the property eliminates UDFI on the sale, though the IRA needs the cash to do it.
What Alternative Assets Cost
Self-directed custodians charge meaningfully more than traditional brokerages, where account fees are often zero. Setup fees range from nothing to several hundred dollars. Annual custodial fees typically run between $275 and $500 for basic accounts. Asset-based fees that scale with account value can climb to $2,500 or more annually for larger accounts. Transaction fees, wire fees, and termination fees add up separately.
Alternative assets carry their own ongoing costs. Real estate needs property management, insurance, taxes, and maintenance. Precious metals need insured storage at an approved depository. Private placements can involve legal review. Because the IRA has to pay all of these itself, your account needs enough liquid cash on hand to cover ongoing expenses without ever tempting you to write a check personally.