URGENT SDIRA News that Could Affect YOU!

Estimated reading time: 3 minutes(Last Updated On: September 24, 2021)

A New Proposed Tax Bill Could Mean Big Changes for YOUR SDIRA and Private Investments

Recently, a new proposed tax bill that could have significant effects on Self-Directed IRA accounts has been circulating in the news. If you haven’t heard, this new tax legislation proposes several big restrictions on Self-Directed IRAs (SDIRAs) and private investing freedoms. With the announcement of the House Ways and Means Committee proposal (specifically Sections 138312 and 138314) and the many changes it includes, it has countless Self-Directed account holders wondering how it will affect them. 

What’s The Risk?

Certain provisions that are in this bill could create dramatic issues and obstacles for investors, and could dramatically change the way you’re used to investing forever.  Changes like limiting your IRA investment choices, eliminating certain Roth Conversions abilities, capping the maximum values of IRAs, limiting IRA ownership in LLCs and other private entities, and in some cases, forcing distributions for some.

Limitations on Investment Options

The biggest change in this bill that affects Self-Directed IRA holders is the proposed limitation on investment choices. “The bill prohibits an IRA from holding any security if the issuer of the security requires the IRA owner to have a certain minimum level of assets or income, or have completed a minimum level of education or obtained a specific license or credential”. This will cause a major problem for those looking to invest in LLCs and other private entities, as this will not be allowed.  This directly affects accredited investors.

The IRS posted the following definition of an accredited investor includes anyone who:

  • earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonably expects the same for the current year, OR
  • has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence).

Forced Distributions

Directly following the previous change, if these certain private investments are held in the account, those assets will have to be distributed by December 31, 2023. Although the President says taxes will not be rising for individuals making under $400,000, yet this bill could force liquidation of assets no matter who you are or how old you are. 

No More Backdoor Roth Conversions

With this proposed new bill, there will also be an elimination of backdoor Roth conversions. Currently, you can convert a Traditional IRA contribution to a Roth IRA in order to have the ability to create tax-free profits. There will no longer be this option for those over a certain income limit if the bill passes. 

Capping IRA Values

Another main proposal in this bill will directly punish those who have successfully grown their IRAs. For those that have managed to build their IRAs up to $10M will receive a cap. What we have seen in our years of self-direction, many of the IRA accounts are under this cap and this cap is aimed at only a handful of investors. Yet, hundreds of thousands of other investors will suffer from these new changes, too. 

What Can You Do To Help?

No matter which side of the political spectrum you may be on, this proposed bill could affect all retirement account holders. We encourage you to start the discussion by contacting your representatives in Congress and the Senate, regardless of party, to share your opinions and express how this could affect everyone. 

IT TAKES LESS THAN 5 MINUTES. By clicking HERE, you can submit an email to your representatives in Congress and the US Senate that has already been drafted for you. All you have to do is put your name and email, and then hit send! Your voice can help make a difference, but it’s critical that you take action to contact your legislators.  

If you have any questions about the new proposed tax bill and how it could affect your account, give us a call. Our IRA Specialists are here to help answer any questions you have. 

Watch an interview style video with Quest Trust President and Founder, Quincy Long, about the new proposed bill:

Leave a Reply

Your email address will not be published. Required fields are marked *