9 Things to Know About IRA Contributions
Making regular contributions to your self-directed Checkbook IRA is a great way to maximize the tax-savings of your plan.
While most people focus on the fact that a self-directed IRA allows for a broad range of investment choices such as real estate, cryptocurrencies, venture capital, and more, it is important to remember that a self-directed IRA is still an IRA at heart.
Just like any other IRA, you can contribute new money each year and build your savings on the front end. The more you have available to invest, the more you will benefit from the compounded tax-sheltering of income over time that an IRA provides.
Here are a few tips about making IRA contributions in a checkbook IRA.
All contribution limits listed below apply to the 2022 tax year.
1 – Know Your IRA Type
Individual Retirement Arrangements come in a few different flavors. Each is tailored for a certain usage and has different contribution limits. It is important to know what type of IRA you have as that will help you understand your capacity to contribute.
A Traditional IRA is the most common. A Traditional IRA can be setup by any individual and has tax-deferred status. That means funds are placed into the IRA pre-tax. Earnings in the IRA are not taxed, but when distributions are taken in retirement, they are taxable. Anyone with earned income can contribute to a Traditional IRA up to the annual limit of $6,000 for those under 50 and $7,000 for those age 50 and older.
A Roth IRA is also an individual plan with the same contribution limits as a Traditional IRA. In a Roth IRA, however, contributions are made post-tax. Any earnings and future distributions are then tax-free.
A SEP IRA is an employer linked IRA that allows for higher contributions. An employer can contribute to the SEP IRA of an employee on a profit-sharing basis up to the plan limit of $61,000. Individual contributions are not allowed. A SEP IRA has tax-deferred status. You can have a SEP IRA as an employee of a business that offers such a plan or choose to setup a SEP IRA for your own business.
A SIMPLE IRA is an employer sponsored IRA that allows for a combination of employer and employee contributions. As an employee, an individual can contribute up to $14,000 if they are under age 50 or $17,000 if age 50 or older. The employer then contributes either by matching employee contributions dollar-for-dollar up to 3% of employee compensation, or with a non-elective contribution of 2% of employee compensation.
Inherited IRA. Any of the above IRA types can be held by a beneficiary of an original account holder who has passed away. No new contributions can be made to an inherited IRA.
2 – Understanding Contribution Limits
Contribution rules can be complex. The best way to be sure you understand if and how much you can contribute is to speak with your licensed tax advisor.
If you have more than one plan, you may be limited in how much you can contribute across those plans. You may be able to contribute, but not take a tax-deduction for doing so in some cases. In employer plans the amount you can contribute is often dependent on income from the business, and you may not be able to contribute up to the maximum.
3 – If You Also Have an Employer Retirement Plan
If you or your spouse have a retirement plan such as a 401(k), 403(b), SEP IRA, SIMPLE IRA, etc. at work, that can impact your ability to deduct a contribution made to a Traditional IRA.
If you are single and your AGI is less than $68,000, you can still make a deductible contribution to a Traditional IRA up to the maximum allowable amount for your age. Between $68,000 and 78,000 a partial deduction is allowed, and the deduction is phased out entirely at $78,000 AGI.
If you are married filing jointly, a fully deductible contribution can be made if your AGI is $109,000 or less. Between $109,000 and $129,000 a partial deduction is allowed. No deduction is allowed with an AGI of $129,000 or more.
Similar limits apply if you are married and do not have access to a 401(k) but your spouse does.
4 – Non-Deductible Contributions
If your ability to deduct a contribution is limited, you can still make the full allowable contribution to a traditional IRA. The contribution amount is flagged as non-deductible on your income tax return for the contribution year. You then need to track that contributed basis as a component of your IRA over time.
The non-deductible basis has already been taxed and will not be taxed again when you take distributions from the IRA in the future. Any growth in value derived from the non-deductible amount will have regular tax-deferred status.
5 – Roth IRA Income Limits
Contributions to a Roth IRA are not tax-deductible. Your ability to make contributions to a Roth IRA is limited by AGI thresholds.
For those who are married and filing jointly, a full Roth IRA contribution for 2021 can be made if AGI is less than $204,000. Between $204,000 and $214,000 there is a phase-out of the amount that can be contributed. No contribution is allowed if AGI is $214,000 or greater.
For a single filer or head of household a full Roth IRA contribution is allowed with an AGI of less than $129,000. The phase-out range is between $129,000 and $144,000. If AGI is $144,000 or greater, no Roth contribution can be made.
6 – If You Have More than One IRA
If you have multiple IRA plans, that can also impact your contribution strategy.
The maximum contribution limit for your age bracket is a single cap for your Traditional and Roth IRA. You can contribute up to the maximum to either or split the contribution across the accounts but cannot exceed the maximum.
If you or your spouse have an employer retirement plan, you may be able to contribute separately to a Traditional IRA or Roth IRA. In a traditional IRA, your ability to deduct your contribution may be limited as outlined above. In a Roth IRA, your ability to contribute is only impacted by your income regardless of whether you have access to a separate employer plan.
7 – How to Make IRA Contributions
Never place an IRA contribution directly in the LLC or Trust that is the checkbook entity for your plan. The checkbook entity is the investment of the IRA, not the IRA proper. To place what you believe to be a contribution directly it the IRA-owned entity would break the proper reporting protocol and could have negative tax consequences.
All contributions must be made into the IRA account held by the custodian of your plan. You will then request that the newly contributed funds be invested into the LLC or trust entity.
Check with your IRA custodian for any fees that may apply to the contribution transaction. Costs vary depending on the custodian, but can range from $0 – $65 including processing and wire fees when applicable. It may make sense to contribute once or twice a year rather than monthly if the processing cost is significant.
8 – When to Make Contributions
The timeline for making IRA contributions varies based on the IRA type.
In a traditional or Roth IRA, you can open the account and make contributions for the prior year up April 15th of the following year. Depending on your savings and investing strategy, it can make sense to double up. Using this method, you can contribute for the prior and current year in the window between January 1st and April 15th, then do this every other year.
A SEP IRA can be established and funded up until the tax filing date for the prior year, including extensions.
A SIMPLE IRA must be opened by October 1st of the tax year in which the plan first becomes active. Employee contributions must be made within 30 days from the end of the pay period from which the contribution is being made. Employer contributions must be made by the tax filing date for the prior year, including extensions.
Be sure to make your contribution well in advance of the deadline. Most financial institutions including your self-directed IRA custodian get very busy around tax season.
9 – Saving Makes a Big Difference
$6,000 placed into an IRA earning 10% will be worth $15,562 in 10 years. In 20 years, that original $6,000 could be worth $40,365.
If you contribute that same $6,000 every year for 20 years, the potential future value is $343,650. You will have more than doubled your $120,000 in savings over that period.
A self-directed IRA is not just a better way to control your investments. The value of continuing to add money to your plan through annual contributions is tangible. Be sure to contribute if you can.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
