A self-directed IRA can hold nearly any investment the IRS doesn't explicitly prohibit. Allowed alternative assets include real estate, precious metals (gold, silver, platinum, palladium), cryptocurrency, private equity, promissory notes, tax lien certificates, and LLCs. The only prohibited assets are life insurance, collectibles (art, antiques, gems, stamps), and S-corporation stock. Each asset type has specific IRS rules you must follow to avoid prohibited transaction penalties.
- Real estate is the most popular SDIRA alternative asset (36% of all SDIRA investments)
- Precious metals must meet IRS fineness standards: 99.5% gold, 99.9% silver
- Crypto gains inside a Roth SDIRA are completely tax-free
- All income and expenses must flow through the IRA, not your personal accounts
Most Americans have their retirement savings in stocks, bonds, and mutual funds — all paper assets controlled by Wall Street. A self-directed IRA breaks you out of that box. You choose what to invest in, and the IRS gives you a surprisingly long leash.
Here's every major alternative asset category, the IRS rules for each, and the real-world pros and cons you need to know.
Alternative Asset Categories at a Glance
| Asset Type | Min. Investment | Income Potential | Complexity | Liquidity |
|---|---|---|---|---|
| Real Estate | $25,000+ | High (rent + appreciation) | High | Low |
| Precious Metals | $5,000+ | Appreciation only | Low | High |
| Cryptocurrency | $1,000+ | Appreciation + staking | Medium | High |
| Private Equity | $25,000+ | High (if successful) | Very High | Very Low |
| Tax Liens | $500+ | 8-36% interest | Medium | Medium |
| Promissory Notes | $5,000+ | Interest income | Medium | Low |
| IRA LLC | $15,000+ (setup) | Varies by investments | Very High | High (checkbook) |
Real Estate
Real estate is the most popular alternative asset in self-directed IRAs, and for good reason. Rental income flows tax-deferred (or tax-free in a Roth), and you keep 100% of the appreciation when you sell.
What you can buy: Residential rentals, commercial properties, raw land, farmland, mobile home parks, storage units, and even foreign real estate.
IRS Rules for Real Estate in an IRA
- All rental income must go directly into the IRA — not your personal bank account
- All expenses (repairs, taxes, insurance, management) must be paid from IRA funds
- You cannot live in the property or use it personally in any way
- No "sweat equity" — you cannot do repairs or improvements yourself
- No hiring disqualified persons (family) to manage or service the property
- If using a mortgage, UDFI (Unrelated Debt-Financed Income) tax may apply to the leveraged portion
Pros
- • Steady rental income (tax-deferred or tax-free)
- • Tangible asset with intrinsic value
- • Potential for significant appreciation
- • Inflation hedge (rents rise with prices)
Cons
- • Illiquid (can't sell overnight)
- • Management complexity within IRA rules
- • Large capital required
- • UDFI tax on leveraged purchases
Precious Metals
Gold, silver, platinum, and palladium can all be held in a self-directed IRA — but only if they meet IRS fineness (purity) requirements. This is the simplest alternative asset to add to your IRA.
IRS Purity Requirements
- Gold: Must be 99.5% pure (American Eagle coins are the sole exception at 91.67%)
- Silver: Must be 99.9% pure
- Platinum: Must be 99.95% pure
- Palladium: Must be 99.95% pure
Metals must be stored in an IRS-approved depository — you cannot keep them at home or in a personal safe deposit box. Popular approved depositories include Delaware Depository, Brink's, and STRATA.
Pros
- • Proven inflation hedge over millennia
- • Low complexity — easy to set up
- • Highly liquid (sell metals any time)
- • No counterparty risk
Cons
- • No income generation (no dividends/rent)
- • Storage fees ($100-$300/year)
- • Dealer premiums above spot price
- • Short-term price volatility
Add Gold to Your IRA the Easy Way
Augusta Precious Metals handles everything: custodian setup, metal selection, and IRS-approved storage. One call, done.
- A+ BBB Rating - Zero Complaints
- 4.9/5 Average Rating
- Dedicated Agent for Life
Cryptocurrency
The IRS treats cryptocurrency as property, making it eligible for self-directed IRAs. Bitcoin, Ethereum, and other major tokens can all be held inside your retirement account. The major advantage: crypto gains inside a Roth IRA are completely tax-free.
IRS Rules for Crypto in an IRA
- Crypto is treated as property (not currency) by the IRS
- Must be held through an IRS-approved custodian that supports crypto
- Standard IRA contribution limits apply ($7,000/$8,000 for 2026)
- No personal use or transfer of crypto outside the IRA
- Staking rewards and airdrops may have tax implications — consult a tax professional
Pros
- • Tax-free gains in a Roth IRA
- • High growth potential
- • High liquidity (trade 24/7)
- • Portfolio diversification
Cons
- • Extreme volatility
- • Regulatory uncertainty
- • Limited custodian options
- • Technology/security risks
Private Equity & Venture Capital
Your self-directed IRA can invest in private companies, startups, and venture funds. If you pick a winner, the returns can be extraordinary — all tax-sheltered. But the risks are equally large.
- Can invest in LLCs, C-corporations, partnerships, and venture funds
- Cannot invest in S-corporations (explicitly prohibited by the IRS)
- Must avoid prohibited transactions with companies you or family members control
- Typically requires accredited investor status ($200k+ income or $1M+ net worth)
- Investments are highly illiquid — your money is locked up for years
Tax Lien Certificates & Tax Deeds
When property owners don't pay their taxes, local governments issue tax lien certificates. Your IRA can buy these certificates and earn interest rates of 8-36% depending on the state. If the owner doesn't pay, your IRA may end up owning the property.
- Interest rates set by state law (8-36% depending on jurisdiction)
- Low minimum investment ($500+ at many auctions)
- Must purchase through the IRA, not personally
- If you foreclose, the IRA owns the property (IRA real estate rules apply)
- Due diligence is critical — some liens are on worthless properties
Promissory Notes & Private Lending
Your IRA can become a private lender. You lend money to a borrower (secured by real estate or other collateral), and the interest payments flow into your IRA tax-deferred. It's like being the bank.
- Typical returns: 8-15% interest secured by real estate
- Cannot lend to disqualified persons (yourself, family, entities you control)
- All loan documents must be in the IRA's name, not yours
- Payments must go directly into the IRA account
- Default risk is real — perform due diligence on every borrower
The #1 Rule for All Alternative Assets
What You CANNOT Hold in an IRA
The IRS explicitly prohibits three categories of assets in any IRA:
- Life insurance policies — Cannot be owned by an IRA
- Collectibles — Artwork, antiques, rugs, gems, stamps, rare coins (that don't meet fineness requirements), alcoholic beverages
- S-corporation stock — Due to S-corp shareholder restrictions
Everything else is fair game, as long as you follow the prohibited transaction rules and work with a qualified custodian.
Alternative Asset IRA FAQs
What alternative assets can I hold in a self-directed IRA?
Real estate, precious metals, cryptocurrency, private equity, promissory notes, tax lien certificates, LLCs, and many other non-traditional investments. The IRS only explicitly prohibits life insurance, collectibles (art, antiques, gems, stamps, rugs), and S-corporation stock.
What assets are NOT allowed in a self-directed IRA?
Life insurance policies, collectibles (artwork, antiques, rugs, gems, stamps, most coins, alcoholic beverages), and S-corporation stock. Certain bullion coins and bars meeting IRS fineness requirements ARE allowed despite the general collectibles ban.
Can I buy real estate with my self-directed IRA?
Yes. Your SDIRA can purchase residential rentals, commercial properties, raw land, farmland, and foreign real estate. All income goes into the IRA, all expenses are paid from IRA funds, and you cannot personally use the property. If using a mortgage, UDFI tax may apply to the leveraged portion.
Is cryptocurrency allowed in an IRA?
Yes. The IRS treats cryptocurrency as property, and it can be held in a self-directed IRA. You need a custodian that supports crypto (like Kingdom Trust or iTrust Capital). Gains within a Roth IRA are completely tax-free, making it a powerful vehicle for crypto investors.
What are the tax benefits of alternative assets in an IRA?
All gains grow tax-deferred (Traditional) or tax-free (Roth). You can sell a property that's doubled in value, reinvest the full amount, and owe zero capital gains tax. Rental income, interest, and dividends all accumulate without annual taxation.
Start with the Easiest Alternative Asset
Precious metals are the simplest way to diversify your IRA beyond Wall Street. Augusta handles everything from custodian setup to metal storage.
- A+ BBB Rating - Zero Complaints
- 4.9/5 Average Rating
- Dedicated Agent for Life