Self-Directed IRA RMDs are one of the most common questions I get from clients in their early seventies. When your retirement account owns a rental property, a private equity fund, or a promissory note instead of mutual funds, you can’t just click a button and sell a few shares to meet your required minimum distribution. The IRS rules are the same as for any other IRA, but the mechanics are very different, and getting them wrong can cost you a 25% excise tax on top of the income tax you already owe.

How RMD Rules Apply to a Self-Directed IRA

A Self-Directed IRA is still a traditional IRA in the eyes of the IRS, so the required minimum distribution rules don’t change because your account owns real estate instead of stocks. Under the SECURE 2.0 Act, RMDs begin at age 73, and that age moves to 75 for anyone born in 1960 or later. Your first RMD can be pushed to April 1 of the year after you reach your RMD age, but every RMD after that is due by December 31. If you delay the first one, you’ll take two distributions in the same tax year, which can push you into a higher bracket.

The calculation itself is simple. You take the account’s balance as of December 31 of the prior year and divide it by your life expectancy factor from the IRS Uniform Lifetime Table in Publication 590-B. For a 73-year-old, that factor is 26.5. So if your Self-Directed IRA was worth $1,000,000 at the end of last year, your RMD this year is about $37,736. The IRS RMD FAQs walk through the tables and deadlines in detail, and I cover the broader rules in our guide to required minimum distributions for 2026.

Unlike a 401(k), an IRA gives you no still-working exception. Even if you’re actively running a business and managing rental properties at 75, your traditional IRA RMDs still apply.

Rule	Traditional Self-Directed IRA	Roth Self-Directed IRA
RMD starting age	73, or 75 if born in 1960 or later	None during the owner’s lifetime
First RMD deadline	April 1 of the year after reaching RMD age	Not applicable while the owner is alive
Annual deadline	December 31	Not applicable while the owner is alive
Valuation date	December 31 of the prior year	Matters for beneficiaries after the owner’s death
Penalty for a missed RMD	25% excise tax, or 10% if corrected within two years	Applies only to beneficiary RMDs

Valuing Real Estate and Private Assets for Your RMD

With a Self-Directed IRA RMD, the hard part is coming up with the year-end value you plug into the formula. A brokerage IRA gets priced every day. A duplex in Phoenix, an LLC interest in a private real estate deal, or a note secured by a fix-and-flip property doesn’t. Your custodian still has to report the fair market value of your IRA to the IRS each year on Form 5498, and that year-end value drives your RMD for the following year.

That’s why most Self-Directed IRA custodians, including IRA Financial, ask clients to provide an updated value for their alternative assets every year. A stale value from the year you bought the property can lead to an RMD that’s too small, which exposes you to the excise tax, or one that’s too large, which means you pay income tax on value that doesn’t exist. I’ve seen clients carry a property at its 2015 purchase price for a decade, and that’s a problem waiting to happen.

Here’s how I generally see different assets valued:

Asset type	Common valuation approach	Practical tip
Rental or investment real estate	Independent appraisal or broker opinion of value based on comparable sales	Get a formal appraisal in any year you plan an in-kind distribution
Raw land	Appraisal or comparable land sales in the same county	Land values can lag, so document the comps you relied on
Private equity or real estate funds	Sponsor’s year-end capital account statement or net asset value report	Ask the sponsor early, since statements often arrive months after December 31
Private company stock or LLC interests	Third-party business valuation	Fractional interests may support valuation discounts, but they need a qualified appraiser
Promissory notes	Outstanding principal plus accrued interest, adjusted for collectability	Note any late payments or defaults, since they affect value
Precious metals and crypto	Market price on December 31	These are the easiest to value and often the easiest to sell

Whatever method you use, keep the documentation. If the IRS ever questions the value behind a distribution, a dated appraisal from a qualified, independent professional is your best defense. Valuing low to shrink your RMD is a mistake, and so is a sudden unexplained jump in value.

Four Ways to Take a Self-Directed IRA RMD From Illiquid Assets

Once you know what your RMD is, you have to decide how to satisfy it. With alternative assets, you have more options than most people realize.

Take cash from rental income or reserves

The cleanest approach is to make sure your Self-Directed IRA has enough cash on hand by December 31. Rent from an IRA-owned property flows back into the IRA, and over a few years it can build a healthy cash balance. Interest and principal payments on a note work the same way. I tell clients who are within five years of their RMD age to start planning for liquidity now, rather than scrambling in November.

Use another IRA to cover the RMD

This is the strategy I recommend most often. The IRS requires you to calculate the RMD for each IRA separately, but you can withdraw the combined total from any one or more of your IRAs. If you have a Self-Directed IRA holding real estate and a traditional IRA at a brokerage holding index funds, you can take the full RMD from the brokerage account and leave the real estate alone. The IRS RMD comparison chart confirms this aggregation rule for IRAs. It doesn’t work across account types, though. A 401(k) RMD can’t be satisfied from an IRA, and a traditional IRA RMD can’t be satisfied from a Roth IRA.

Distribute the asset in kind

If you don’t have the cash, you can distribute the asset itself. An in-kind distribution moves the property, fund interest, or note out of the IRA and into your personal name. The fair market value on the date of distribution counts as the amount distributed, and it’s taxed as ordinary income just like a cash withdrawal. Once the property is out of the IRA, the prohibited transaction rules no longer apply, so you can live in it, rent it to your kids, or manage it however you like. I go deeper on the mechanics in our post on in-kind distributions from a Self-Directed IRA.

The catch is taxes. An in-kind distribution gives you income without cash, so you’ll need money outside the IRA to pay the tax bill. You’ll also want to check whether your state or county imposes a transfer tax when the deed moves from the IRA to you, since this varies by jurisdiction.

Distribute a partial interest

If your RMD is $40,000 and your property is worth $500,000, distributing the whole property overshoots by a wide margin. Instead, the IRA can deed you a fractional, undivided interest in the property, say 8%, so the IRA and you own it together as tenants in common. That interest satisfies the RMD, and the IRA keeps the rest. You can repeat the process each year.

This works, but it requires care. Once you personally co-own an asset with your IRA, every expense, repair, and rent payment has to be split strictly in proportion to ownership. Paying an IRA expense from your personal funds, or taking more than your share of the rent, can create a prohibited transaction. Partial distributions also require a fresh appraisal each time, and the value of a fractional interest is often lower than its proportional share of the whole, which a qualified appraiser should document.

Roth IRAs, Solo 401(k) Plans, and Inherited Accounts

A Roth Self-Directed IRA has no RMDs during your lifetime, which is one of the biggest reasons I’m such a fan of holding long-term, illiquid assets in a Roth. You never have to worry about valuing a property just to calculate a withdrawal you don’t want to take. Since 2024, SECURE 2.0 also removed lifetime RMDs from Roth 401(k) accounts, including the Roth portion of a Solo 401(k).

The pre-tax portion of a Solo 401(k) works differently from an IRA in two important ways. First, 401(k) RMDs can’t be aggregated with your IRAs, so the plan has to make its own distribution each year. Second, the still-working exception that lets some employees delay RMDs doesn’t help most Solo 401(k) owners, because anyone who owns more than 5% of the business sponsoring the plan must start RMDs at their RMD age regardless of whether they’re still working. If you own the business, you’re well over 5%.

Inherited accounts bring their own set of rules. Most non-spouse beneficiaries who inherited after 2019 must empty the account within ten years. Under the IRS final regulations issued in July 2024, if the original owner had already started taking RMDs, the beneficiary must also take annual RMDs in years one through nine, a requirement that took effect in 2025. For heirs inheriting a Self-Directed IRA full of real estate, that means the same valuation and liquidity planning I described above, compressed into a ten-year window. Inherited Roth IRAs still have to be emptied by the end of year ten, but annual distributions generally aren’t required before then.

Planning Ahead for Self-Directed IRA RMDs

The investors who handle RMDs well are the ones who start thinking about them in their mid-sixties. A few moves I suggest to clients:

• Build a cash cushion inside the IRA. Let rental income or note payments accumulate so the IRA can fund at least a year or two of RMDs without selling anything.
• Keep a liquid IRA alongside your Self-Directed IRA. Because IRA RMDs can be aggregated, a modest brokerage IRA can absorb the RMD for your entire IRA portfolio.
• Consider Roth conversions before RMDs begin. Converting an asset in a year when its value is lower can reduce the tax on the conversion and eliminate future lifetime RMDs on that asset. Once RMDs start, the year’s RMD has to come out before any conversion.
• Time your exits. If you’ve planned to sell a property within the next few years anyway, selling inside the IRA before your RMD age gives you cash to work with and avoids the valuation question entirely.
• Update values every year. A current appraisal or sponsor statement protects you from both underpaying and overpaying.
• Don’t wait until December. Deeds, appraisals, and sponsor paperwork take time, and custodians get busy at year-end.

When I founded IRA Financial, the whole idea was to give investors the freedom to put retirement money into the assets they understand, like the rental properties covered in our guide to real estate investing with a Self-Directed IRA. That freedom comes with responsibility once RMDs begin. Our flat-fee structure means you aren’t charged more as your property appreciates, and our in-house tax team regularly helps clients work through valuations and in-kind distributions.

Final Thoughts

Required minimum distributions are the moment when an illiquid Self-Directed IRA meets the IRS’s demand for annual withdrawals. You have real options: cash from rents, a distribution from another IRA, an in-kind transfer of the property, or a partial interest. The right choice depends on your liquidity, your tax bracket, and what you want to do with the asset next. If you plan a few years ahead, keep your valuations current, and know how the aggregation rules work, RMDs become a routine annual task instead of a year-end scramble.

This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.