2021 Proposed IRA Changes are Going to Hurt Millions of Self-Directed IRA Owners

Eliminates Certain Investments And Forces Distributions or Sell of Assets

The proposed legislation would prohibit IRAs from holding private equity and debt securities.

It also prohibits IRA owners from investing in non-publicly traded entities in which the IRA owner and related entities (including the IRA itself) own more than a 10% interest or any entity in which the IRA owner is an officer or director, regardless of ownership percentage.

For example, single-member LLCs or any investment in an entity in which an individual is a director or officer could no longer be held in an IRA. 

If the proposed legislation is enacted:

• IRAs holding any of the above investments would lose all of the tax advantages previously available to the IRA.
• you will no longer be able to purchase any of the above investment types in your IRA.
• you will be required to dispose of any such investments that you currently hold in your IRA by no later than December 31, 2023.

This means that if the asset(s) could not be sold or liquidated and must be distributed in-kind from the IRA, you would be facing significant and previously unforeseen financial and tax consequences, including taxes and penalties.

Build Back Better Bill

UPDATE: 11/10/2021

As of now, the provisions prohibiting certain investments (targeting Private Placements) and changes to current ownership/officer relationship limits have been REMOVED from the Bill. 

Several other provisions have been placed back into the Bill, with some amendments, that we also believe should be removed, for example, caps on Mega IRAs and changes to ROTH conversions.