How to Lend Money With a Self-Directed IRA

A Self-Directed IRA can act as the lender in a private-lending deal. The account holds a promissory note as one of its assets, the borrower pays interest into the account, and that interest grows inside the IRA rather than reaching you as personal income. This article walks through how the mechanics work, who your IRA cannot lend to, and how the paperwork flows through Accuplan.

Key takeaways

• A Self-Directed IRA can lend money by holding a promissory note as an asset. The borrower pays interest into the IRA, not to you personally.
• A group of IRAs can co-fund a single note on a shared platform, each with its own paperwork and its own share of the interest.
• Old 401(k)s you’ve forgotten about can often be located and rolled into your SDIRA to help fund a note.
• Your IRA cannot lend to a disqualified person, a defined list of family members and related parties. Breaking that rule can put the account’s entire tax-favored status at risk, not just the loan.

Can a Self-Directed IRA lend money?

Yes. A Self-Directed IRA can hold a promissory note, a signed agreement where a borrower promises to repay a loan with interest, as an asset. The IRA is the lender, the borrower is a third party, and the interest the borrower pays flows back into the IRA. You never touch the money personally.

This article is for anyone with a Self-Directed IRA, or anyone thinking about opening one, who has been offered a private-lending deal. Most of these deals are short-term notes backed by real estate: a rehab loan, a bridge loan, a deal where someone needs cash faster than a conventional lender will move.

If you’re looking at this from the other direction and wondering whether you can borrow money out of your own IRA, that’s a different set of rules. See Borrowing and Lending From a Self-Directed IRA.

How does private lending work inside an IRA?

The paperwork trail is what makes the deal an IRA asset instead of a personal loan. The note is titled to the IRA, so the IRA is legally the lender. Funds leave the IRA custody account and go directly to the borrower or the closing agent. Interest payments come back to that same custody account. If any of that money passes through your personal accounts along the way, the deal risks being recharacterized.

Say you have $150,000 in a Self-Directed IRA and fund an $80,000 short-term note to a real estate investor. The note is signed to the IRA. The borrower makes monthly interest payments back into the IRA. Twelve months later, the principal returns the same way. The account grew, and you received no personal tax bill on any of it, because none of the money ever passed through your hands.

The IRA custody account holds the note and processes the payments as they come in. Monitoring the borrower and enforcing the terms of the loan, if that ever becomes necessary, is your job, typically with a real estate attorney. For more on how a Self-Directed IRA works as a structure, see the self-directed IRA overview.

Can multiple IRAs fund the same loan?

Yes. Accuplan’s platform supports group deals natively. Multiple Self-Directed IRAs can co-fund a single promissory note, with each account holding its own share as a separate asset in that account.

Real estate lenders often fund notes as a group. A $400,000 rehab loan might be split across six IRAs, each contributing $50,000 to $100,000. A lead investor or syndicator builds the deal once in the Accuplan platform, and other participating account holders can be invited into it directly. Each participating IRA ends up with its own signed paperwork, funds its own share, and receives its own pro-rata interest payments back into that specific IRA. There is no spreadsheet chasing across custodians, no parallel paper packets, and no emailing PDFs between six administrators.

Most SDIRA administrators leave the group-deal problem to the account holders and their attorneys. Accuplan solves it in the platform itself, which is why syndicators who use Accuplan can onboard investors in days instead of weeks.

The compliance rule doesn’t change based on how many IRAs are involved. Every participating IRA still has to independently clear the disqualified-person test, the rule against lending to close family and related parties covered in detail below.

Can I use an old 401(k) to fund the loan?

Often, yes. A lot of real estate investors turning to private lending have retirement money they’ve forgotten about. Research from Capitalize found that, as of July 2025, roughly 31.9 million forgotten 401(k) accounts held about $2.1 trillion in retirement assets, with an average balance around $66,000.

The onboarding platform for a Self-Directed IRA is integrated with Beagle, a retirement-account locator service. When you open a Self-Directed IRA, the platform can search for 401(k)s from previous employers, not just the plan at your current job, and start a rollover for any it finds.

For a specific deal, that can turn “I don’t have quite enough on hand” into “I have more than I thought.” See IRA transfers vs. rollovers for the mechanics of moving funds into the account.

Who can my IRA not lend to?

Your IRA cannot lend to a disqualified person, a specific list of family members and related parties defined by federal tax law. Break this rule and the consequence hits the entire IRA balance, even if the loan itself is a small piece of the account.

In plain English, disqualified persons include you, your spouse, your parents and grandparents, your kids and grandkids, and their spouses. Your IRA cannot lend to any of them under the disqualified-person rule.

Siblings, aunts, uncles, cousins, and in-laws other than the spouse of a lineal descendant don’t count. A private-lending deal to a sibling can legitimately sit inside the IRA, because siblings aren’t on the disqualified-person list. A loan to your own child, by contrast, falls squarely within the disqualified-person rule, and the IRA cannot be used to fund it.

If you personally are the one who crosses this line, the tax code treats it as a prohibited transaction. A different rule then applies. It can treat the entire IRA as distributed on January 1 of the year the violation happened, with the full balance taxed as ordinary income that year plus a 10% early-withdrawal penalty if you’re under 59½.

Say you have $400,000 in an IRA and lend $60,000 of it to your son to buy a car. The whole $400,000 becomes taxable that year, even though the loan itself was only $60,000.

The same rule reaches entities in your orbit. An LLC you own 50 percent or more of counts as a disqualified person, so your IRA can’t lend to it either. A business your spouse owns is treated the same way. Co-signing the note yourself would put you, a disqualified person, back into the transaction. If the borrower is anyone you already have a business relationship with, get a compliance review before funding.

How is interest income from a private note taxed?

Interest paid into the IRA is treated the same way dividends or capital gains from any other IRA investment are. There’s no separate tax filing at the IRA level for it, under the tax code’s passive-income exclusion.

What happens after that depends on the type of IRA. In a Traditional, SEP, or SIMPLE IRA, the interest compounds tax-deferred, and distributions in retirement are taxed as ordinary income. In a Roth IRA, the interest compounds tax-free, and qualified distributions come out fully tax-free once you’ve held the account five years and are 59½ or older, under the Roth qualified-distribution rule.

An unrelated business income tax, commonly called UBIT, and a related tax on debt-financed income called UDFI can show up when an IRA holds an LLC, a C corporation, or debt-financed property. They don’t typically apply to a straight promissory note held directly by the IRA.

How do I fund a private note through Accuplan?

Four steps get you from an open account to a funded note.

1. Open your Self-Directed IRA. The application is online, identity verification takes a few minutes, and there’s no paperwork to mail. Accuplan charges a flat annual administration fee that doesn’t scale with the number of assets you hold, plus transaction fees for specific actions like wires, ACH transfers, and document handling. See current fees for the full schedule.
2. Fund the account. Transfer from an existing IRA, roll over from an employer plan, or use the Beagle search described above to locate old 401(k)s you may have forgotten.
3. Direct Accuplan to fund the note. You bring the note details. Accuplan confirms the note is titled to the IRA, then wires funds from the IRA custody account to the borrower or closing agent.
4. Let the payments come back to the IRA. Interest arrives at the IRA custody account by ACH or wire, not to your personal bank account and not to a family checking account.

Accuplan administers the account. AET, the account’s custodian, holds the assets. You make the investment decision, monitor the borrower, and bring in counsel if collections or foreclosure ever become necessary.

Ready to fund a note?

The path is linear: open the account, fund it, including any forgotten 401(k)s you didn’t know you had, direct Accuplan to originate the note, and monitor the payments as they come in.

Open an account online to get started, or talk to us first if you have a specific deal in front of you and want to walk through the mechanics before funding it.

Accuplan administers the account so the note can be held correctly and the interest can compound tax-advantaged. Investment decisions, underwriting, and borrower evaluation stay with you and your own advisors.

This article explains how private lending works inside a Self-Directed IRA. It isn’t tax or legal advice. Rules around disqualified persons and prohibited transactions are strict and fact-specific. Talk with a tax advisor or attorney before funding a note, especially if the borrower has any personal or business connection to you.