Quick answer: A self-directed IRA can hold real estate, and gains grow tax-deferred (or tax-free in a Roth) the same as any other IRA asset – but ‘legally avoid taxes’ overstates it: the rules under IRC Section 4975 prohibit personal use of the property and transactions with disqualified persons (including yourself), and violating them can disqualify the entire IRA.

What’s actually allowed

A self-directed IRA can purchase investment real estate, with all income (rent) and expenses flowing through the IRA – the property itself, not you personally, must be the owner of record, and all transactions must go through the custodian.

What’s prohibited, and why it matters

IRC Section 4975 prohibits you, your spouse, and certain family members from personally using IRA-owned property, performing repairs yourself, or otherwise engaging in transactions with the IRA – violating these rules can retroactively disqualify the entire IRA, triggering taxes and penalties on the full balance, not just the real estate portion.

Frequently Asked Questions

Can I live in a house my IRA owns?

No – personal use of IRA-owned property by you or disqualified family members is a prohibited transaction under IRC 4975.

Can I do the repairs myself to save money?

No – performing labor on IRA-owned property yourself is generally treated as a prohibited transaction; repairs must be paid for and performed through arms-length third parties using IRA funds.

Source: IRS: Retirement Plans FAQs Regarding IRAs Investments

Written by Samuel, Certified Public Accountant. Published August 2026. Last updated: August 2026.