Self-Directed IRA Explained: Assets, Rules, and How It Works

A self-directed IRA is a retirement account that looks like a conventional IRA on your tax return but works differently on the inside. Instead of holding stocks and funds chosen by a brokerage, it holds assets you select: real estate, private equity, precious metals, and more. Most Americans have never heard of it, yet it is the legal structure behind every gold IRA opened through a specialized dealer.

What Is a Self-Directed IRA?

A self-directed IRA is an Individual Retirement Account that gives the account holder authority to direct investments into assets that standard brokerages do not offer. The IRS created the framework in the Employee Retirement Income Security Act of 1974, and the rules governing contribution limits, tax treatment, and eligible assets are codified in IRS Publication 590-A and IRS Publication 590-B.

The “self-directed” label is not a separate IRA category in the tax code. There is no Box 12 on Form 5498 that says “SDIRA.” The distinction is custodial: an SDIRA custodian is a bank, trust company, or IRS-approved non-bank custodian that explicitly permits alternative assets. A standard brokerage like Fidelity or Vanguard is also an IRA custodian, but it restricts holdings to the products it sells.

Self-directed IRAs follow the same annual contribution limits as conventional IRAs. For 2025, that is $7,000 per year ($8,000 if you are 50 or older), per IRS retirement topics guidance. Rollovers from 401(k) plans or other IRAs are not subject to the annual limit, which is how most large precious metals positions are funded.

Traditional SDIRA vs. Roth SDIRA

Both versions exist. A traditional self-directed IRA takes pre-tax contributions; you pay income tax on withdrawals in retirement. A Roth SDIRA takes after-tax contributions; qualified withdrawals in retirement are tax-free. The asset rules are identical between the two. The tax timing is the structural difference. Which version fits your situation is a question for a licensed tax advisor, not this guide.

How an SDIRA Differs from a Standard Brokerage IRA

If you hold an IRA at Charles Schwab or Fidelity, you can buy stocks, bonds, ETFs, and mutual funds available on their platform. That is a custodial restriction, not a tax code restriction. The IRS permits much more. The SDIRA structure exists to give investors access to the full IRS-eligible asset list, not just the ones a brokerage profits from selling.

Four practical differences stand out:

1. Custodian type. SDIRA custodians specialize in alternative assets. They handle title transfers on real estate, coordinate physical delivery to depositories for metals, and process private equity capital calls. Standard brokerages do not.
2. Fee structure. SDIRA custodians typically charge annual flat or asset-based fees. Standard brokerages often charge nothing for account maintenance but earn on trading commissions and fund expense ratios. SDIRAs have real, visible fees. See the fees section below.
3. Investor responsibility. The account holder, not the custodian, is responsible for due diligence on the investment. The custodian processes transactions; it does not evaluate whether an investment is sound or compliant. This is one reason SDIRAs carry higher risk of fraud and prohibited transactions.
4. Prohibited transaction monitoring. With a standard brokerage, prohibited transactions are rare because the platform restricts the universe. With an SDIRA, where you could technically buy a rental property from your own sibling, the rules in IRC Section 4975 require active attention.

What You Can Hold in a Self-Directed IRA

The IRS defines the list of what is NOT allowed (see the next section). Anything not on the prohibited list is permitted, provided you can find a willing SDIRA custodian and the asset can be held in the name of the IRA.

Precious Metals: IRS Purity Standards

Gold, silver, platinum, and palladium are permitted in an SDIRA, but only to the specific purity standards set in IRC Section 408(m)(3). For gold: .995 or higher purity. Silver: .999 or higher. Platinum and palladium: .9995 or higher. American Gold Eagles are explicitly approved as an exception (they are .9167 fine) because Congress included that exception in the statute.

Approved products include American Eagles (gold, silver, platinum), American Buffalo gold, Canadian Maple Leafs, Austrian Philharmonics, Australian Kangaroos, and bullion bars from LBMA-approved refiners. Every dealer Goldiew works with confirms IRS eligibility on the products they offer for IRA accounts. Verify that confirmation in writing before purchasing.

What SDIRAs Do Not Allow

Two categories generate the most confusion and the most tax mistakes.

Collectibles under IRC Section 408(m)

IRC Section 408(m) lists what counts as a “collectible” that disqualifies the IRA. The list covers works of art, rugs, antiques, metals or gems (with the bullion exception described above), stamps, coins (outside the bullion exception), alcoholic beverages, and any other tangible personal property specified by Treasury. Purchasing a collectible inside an IRA counts as a distribution in the year of purchase, triggering income tax owed and, if you are under 59½, a 10% early withdrawal penalty.

The exception for IRS-approved bullion is explicit in Section 408(m)(3). Only bullion meeting the purity standards and government-minted coins meeting those standards escape the collectible classification. Rare or numismatic gold coins are not the same as bullion coins, even if they contain gold. Buying a rare collectible coin inside an IRA is a taxable distribution regardless of gold content.

Life Insurance

Life insurance contracts cannot be held in any IRA, self-directed or not. This is a hard prohibition with no exceptions. Any promoter claiming you can run “infinite banking inside your IRA” is describing a structure the tax code does not permit.

S-Corporation Stock

IRAs are tax-exempt entities. S-corporations may only have certain categories of shareholders, and a tax-exempt entity does not qualify. Purchasing S-corp stock inside an IRA immediately terminates the S-corp election. This comes up primarily in private equity deals where the operating company uses an S-corp structure.

The SDIRA Custodian’s Role

Every IRA, including a self-directed one, must have a custodian. This is a legal requirement. The custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity specifically approved by the IRS as a non-bank custodian under Treasury Regulation 1.408-2(e).

For a precious metals SDIRA, the custodian does four things:

1. Holds title. The metals are owned by the IRA, not by you personally. The custodian is the named owner on the depository account.
2. Processes purchase and sale instructions. When you instruct the custodian to buy gold bullion from a specific dealer, the custodian sends funds to the dealer and coordinates delivery to the approved depository.
3. Maintains IRS reporting. Custodians file Form 5498 (IRA contributions and fair market value) and Form 1099-R (distributions) with the IRS each year.
4. Charges fees. Custodians earn revenue through setup fees, annual maintenance fees, and sometimes transaction fees. These are separate from dealer fees and depository storage fees.

Custodians do not evaluate the quality of investments. FINRA’s investor alerts specifically warn that custodian approval does not equal investment quality approval. Picking a reputable custodian matters. It does not substitute for your own due diligence on what you buy.

For a full explanation of how custodians and dealers differ in the gold IRA process, see: Gold IRA Custodian vs. Dealer: What Is the Difference?

SDIRA Fees: What to Budget

SDIRAs carry real, visible fees that conventional brokerage IRAs typically do not. Four categories apply to a precious metals SDIRA:

Fee ranges shown are industry-reported typical figures and will vary by custodian and account size. Always request the full fee schedule in writing before opening an account. Some dealers negotiate custodian fee waivers for qualifying new accounts as part of the account-opening process. Augusta, for example, publicly advertises a multi-year fee waiver for qualifying rollover accounts (current terms reviewed during a free consultation).

Whether SDIRA custodian fees and storage fees are tax-deductible in your situation depends on your specific circumstances and current law. Consult your tax advisor before claiming any deduction.

Prohibited Transactions: What They Are and Why They Matter

A prohibited transaction is any direct or indirect transaction between an IRA and a “disqualified person” as defined in IRC Section 4975. The IRS created this rule to prevent account holders from using the tax-exempt status of their IRA to benefit themselves personally.

Who Is a Disqualified Person?

The account holder is always a disqualified person. So are the account holder’s spouse, lineal descendants (children, grandchildren), lineal ancestors (parents, grandparents), and their spouses. Service providers to the IRA, including the custodian itself, are also disqualified persons. Any business in which you own 50% or more is disqualified.

Examples That Come Up Repeatedly

The SEC investor bulletin on self-directed IRAs flags these scenarios:

• Using IRA funds to buy a rental property you then rent to your child
• Lending IRA funds to yourself or your own business
• Buying gold from a dealer you personally own
• Taking personal use of an IRA-owned vacation rental (any personal use counts)
• Storing IRA-owned gold at your home or in a personal safe

Home storage gold IRAs deserve specific attention. Storing IRA-owned metals at your residence is treated as a taxable distribution in the year the metals were removed from depository custody. You owe income tax on the full value and the 10% early withdrawal penalty if under 59½. Multiple Tax Court cases have confirmed this. FINRA’s investor insights page specifically calls out “home storage gold IRA” promotions as a fraud risk.

Consequences of a Prohibited Transaction

If you engage in a prohibited transaction, the IRS treats the entire IRA as distributed to you on the first day of the year the transaction occurred. For a $300,000 IRA, that means income tax on $300,000 in a single year, plus the 10% early withdrawal penalty if applicable. The consequence is disproportionate to the triggering transaction.

Precious Metals Dealers and the SDIRA Setup Process

A dealer is not a custodian. This distinction shapes the entire gold IRA setup process.

Dealers sell IRS-approved precious metals products and help customers through the SDIRA account setup. They work with IRS-approved custodians who hold the metals. The dealer handles product selection and the purchase transaction; the custodian handles account title, IRS reporting, and tax compliance. You work with two separate entities, not one.

Goldiew works with three dealers that specialize in precious metals SDIRAs. All three are BBB-accredited and have verified user reviews on the Goldiew platform. Here is a brief profile of each:

Augusta Precious Metals

Trusted since 2012. Education-first process with salaried, non-commissioned staff. Rated Money Magazine’s Best Overall Gold IRA Company for 2022-2026. BBB A+ with zero complaints.

Get Augusta’s free Gold IRA guide

Money Magazine #1 (2022-2026) • BBB A+ Zero Complaints

Birch Gold Group

In business since 2011. 40,000+ customers served. Iowa-headquartered with a dedicated in-house IRA department and multiple approved depositories. BBB A+.

Get Birch’s free Info Kit

40,000+ Americans since 2011 • BBB A+ • AAA BCA

Noble Gold Investments

Noble’s marketing references industry experience going back to 2003. 16,000+ investors, $2.5 billion safeguarded. Operates its own Texas-based depository.

Get Noble’s free Gold guide

16,000+ investors • $2.5B safeguarded • Texas Depository

For full reviews including fee structures, setup walkthroughs, and user ratings: Augusta Precious Metals on Goldiew, Birch Gold Group on Goldiew, and Noble Gold Investments on Goldiew.

All three offer free initial consultations and can explain their custodian relationships in detail.

We are not financial advisors. Consult a licensed advisor before making retirement decisions.

Is a Self-Directed IRA Right for You?

An SDIRA is not a universal upgrade to a conventional IRA. It fits specific situations.

Situations Where an SDIRA Tends to Make Sense

• You have existing retirement savings and want exposure to alternative assets unavailable through your brokerage IRA.
• You understand the prohibited transaction rules and are prepared to follow them actively.
• You have an account balance that meets the practical minimums for the asset class and custodian you want to use. For precious metals, industry-reported minimums range from around $10,000 (Birch) to $50,000 (Augusta).
• You are prepared to pay custodian and storage fees in addition to the cost of the underlying assets.

Situations Where an SDIRA May Not Fit

• Your IRA balance is below the practical minimums for the asset class you want.
• You need to access the funds within the next five years (most SDIRA assets are illiquid).
• The added complexity of prohibited transaction monitoring does not fit your situation.
• You want a licensed advisor to manage your holdings actively; SDIRAs are self-directed by definition.

This is not financial advice. Your specific situation (account balance, time horizon, existing asset mix, tax bracket) determines whether an SDIRA makes practical sense. A certified financial planner or CPA can model the cost-benefit for your circumstances.

Frequently Asked Questions