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Summary of IRA Rules

Basic Self-Directed IRA Rules

  1. Prohibited Investments - Investment in certain assets are prohibited. They include:
    • Insurance
    • Collectibles (coins, art work)
    • S Corporations
    • Common Collective Investment Funds

  2. Disqualified Persons are individuals who cannot share ownership, management or control over your IRA account. Disqualified Persons include, but not limited to, the following:
    • Spouse
    • Children
    • Grandchildren
    NOTE: Any “disqualified person” for investment management purposes may still be a beneficiary of your IRA.

  3. Self-Dealing Prohibited
    You may not authorize your IRA to enter into any transaction with yourself. For example, your primary residence cannot be acquired as an asset in your IRA.

  4. Contribution Limits
    You must have a taxable earned income in order to contribute to an IRA. See the following chart for the potential limitations on contributions.
    Age Under 50 Years Old 50 Years Old or Older
    2018 Annual Limit on Contributions * Up to $5,500 Up to $6,500

    Note: Rules governing the income tax deductibility of IRA contributions are varied and numerous. Please consult a qualified tax professional for advice on such matters.

  5. Early Withdrawal Penalty
    Withdrawals from a traditional IRA are taxable at your current Federal and State income tax rate when the withdrawal is made. In addition, the law imposes an additional 10% penalty tax on early distributions from traditional and Roth IRAs, unless an exception applies. Generally, early distributions are those that you receive from an IRA before reaching age 59½. The additional 10% tax applies to the part of the distribution that you must also must include in taxable gross income. It is in addition to any regular income tax due on that amount.

    Exceptions to the early withdraw penalty include early withdrawals:
    • made to a beneficiary or estate on account of the IRA owner's death
    • made on account of qualified disability
    • made as part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary
    • for qualified first-time homebuyer distributions
    • not in excess of your qualified higher education expenses
    • not in excess of certain medical insurance premiums paid while unemployed and not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income
    • due to an IRS levy, or
    • for qualified reservist distributions

  6. Annual Minimum Distributions are required beginning at age 70½ for the following types of IRAs:
    • Traditional
    • SEP
    • Simple

    Roth IRAs do not require minimum distributions at any age.
Last Modifications: 5/18/2022 3:26:35 PM