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How Do I Setup a Checkbook for an IRA?

How Do I Setup a Checkbook for an IRA?

A Self-Directed IRA is an individual retirement account that allows one to invest in non-traditional assets, such as real estate. Self-Directed IRAs can generally invest in any assets except:

  • Collectibles
  • Life insurance
  • Any investment that directly or indirectly involves or benefits a ”disqualified person.” A disqualified person is generally defined as the IRA owner, any of his or her lineal descendants or, or any entity controlled by such persons.

Essentially, so long as the investment is approved on a federal level, and doesn’t fall into one of the above categories – you can invest your IRA in it!

Key Points
  • Checkbook Control gives you the freedom to invest when you want
  • Setting up your Checkbook IRA is fast and easy
  • Start investing in things you know and trust now

Why Set-up a Self-Directed IRA?

The two most popular reasons for setting up a Self-Directed IRA are: (i) tax deferral and (ii) investment choices.

Tax advantage

From a tax standpoint, in the case of an  IRA, all income and gains generated by the IRA go back to the IRA without tax or tax-free in the case of a Roth.  For example, if a Self-Directed IRA owns a real estate property and it generates $10,000 of rental income a month, the net amount of rental income collected by the IRA during the year would not be subject to tax.

However, any IRA investments involving debt, such as a nonrecourse real estate loan, or an investment in an active trade or business could generate unrelated business taxable income (UBTI) tax, which would subject the investment to a tax of up to 37%.

Investment Choices

The Self-Directed IRA allows one to invest in assets outside of the financial markets, allowing IRA investors to diversify their retirement accounts in hard assets, such as real estate. Moreover, a growing number of retirement investors have become comfortable with real estate and other hard asset types of investments. 

These investment categories, such as real estate, private placements, gold, and others, offer retirement account owners the ability to invest their IRA funds in assets they know and understand.

Why Go Checkbook?

The checkbook control Self-Directed IRA has become a popular way for real estate and other IRA investors to gain more control and protection when investing.  Like the term Self-Directed IRA, the term Checkbook Control IRA or Checkbook IRA is not a legal term or even a term you will find in the tax code.  A Checkbook IRA is a type of Self-Directed IRA that uses an LLC or other entity to invest while having the entity managed or controlled by the IRA owner. 

Ever since the Court in Swanson V. Commissioner 106 T.C. 76 (1996), held that the funding of a new entity by an IRA managed by the IRA owner was not a prohibited transaction pursuant to IRS Code Section 4975, IRA investors have turned to the Checkbook IRA as a way to gain greater control and better protection for their IRA assets.

How the Checkbook IRA Works


Below is a breakdown of how the “Checkbook IRA” structure works:

  1. Establish a Self-Directed IRA by signing up on our app!
  2. Transfer or rollover your retirement assets that you will be using for investing tax-free to IRA Financial.  We will handle all IRA transfers automatically, although rollovers from 401(k) plans will need to be initiated by you (we are always available to assist).
  3. IRA Financial will establish a special purpose LLC that will be wholly owned by the IRA.
  4. IRA Financial will establish an LLC bank account at Capital One for you, or you are free to use a bank of your choice.
  5. You will be notified once your funds have been transferred to IRA Financial and we will send the funds to your LLC.
  6. You, as manager of the LLC, will then have checkbook control over all the assets/funds in the IRA LLC to make the investment and can make any IRA LLC investment by check or wire on your own.
  7. Since the LLC will be owned by one IRA, the LLC will be treated as a disregarded entity for federal income tax purposes and no federal income tax return will required to be filed. All income and gains from the investments will flow back to the IRA without tax.

The IRA Financial Checkbook IRA Solution

IRA Financial is the leading provider of self-directed retirement plans. We literally wrote the book on the Checkbook IRA!

The IRA Financial app will allow you to set up, fund, and invest your Self-Directed IRA funds quickly, easily, and for one low flat fee.  IRA Financial has no transaction fees, asset valuation fees, wire fees, or even a minimum balance requirement.

With over 12 years of experience in the area of self-directed retirement accounts, our Self-Directed IRA experts will take care of the entire set-up process for you, including forming the IRA-owned LLC, acquiring the LLC Tax ID#, and even preparing the checkbook IRA LLC operating agreement.  All for one low flat fee with no hidden fees.

Join the 23,000+ strong IRA Financial Self-Directed IRA nation today!


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