Can I Partner My IRA with Personal Funds on an Investment?

When planning for retirement, many investors want to go beyond the traditional world of stocks, bonds, and mutual funds. A Self-Directed IRA (SDIRA) opens the door to alternative investments like real estate, private lending, and more. But what happens if your IRA doesn’t quite have enough cash on its own to make a purchase? Can you combine your IRA with your personal funds to seize an opportunity?

The good news is that you can, if it’s done properly. Here’s how IRA partnerships work, the rules you need to follow, and examples of when combining personal cash with SDIRA funds makes sense.

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What Is an IRA Partnership?

An IRA partnership is when your retirement account joins forces with other money sources to buy an investment. These sources can include your own personal funds, your spouse’s funds or IRA, or even money from other investors.

There are a few common ways this might look:

• Partnering your IRA with your own personal funds (the focus of this article).
• Partnering your IRA with a spouse’s IRA or personal money.
• Partnering with unrelated investors and their IRAs.

Each participant owns a percentage of the asset based on the amount they contributed.

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The Rules You Must Follow

Because IRAs come with powerful tax benefits, the IRS has strict guidelines to keep everything fair and above board. Here are the most important rules:

• The partnership must be structured at the time of purchase. You can’t start by buying the investment with personal money and then later decide to bring in your IRA (or vice versa).
• Each partner pays expenses and receives income strictly according to their ownership percentage. If your IRA owns 70% and your personal cash owns 30%, your IRA must pay 70% of all costs and receive 70% of the profits.
• You cannot personally benefit from the IRA’s share of the investment beyond what your ownership allows. That means you can’t live in, vacation at, or otherwise use a property that your IRA partially owns.

Failing to follow these rules could lead to serious IRS penalties and even disqualification of your IRA’s tax-advantaged status.

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How It Works in Practice

Let’s say you find a rental property that costs $200,000. Your SDIRA contributes $140,000 (70%) and your personal funds contributes $60,000 (30%). From that point on:

• Your IRA pays 70% of the ongoing costs like taxes, insurance, and maintenance.
• Your personal funds pay 30% of those costs.
• Rental income is also split 70/30 between your IRA and personal account.

It’s critical to keep clear records to show that all income and expenses are handled according to ownership shares. Your IRA administrator will rely on this documentation to ensure the investment stays compliant.

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When Investors Typically Use Partnerships

• Buying real estate that your IRA can’t afford on its own.
• Participating in private placements, joint ventures, or syndications that require more cash than your IRA holds.
• Pooling multiple accounts together, like combining your Traditional IRA, Roth IRA, spouse’s IRA, children’s IRA, and personal funds into a single deal.

By partnering, you can take on bigger opportunities and spread risk across different funding sources.

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Key Compliance Tips

• Decide on ownership percentages up front, at the time you make the investment.
• Never pay for IRA expenses from your personal bank account, and don’t use IRA funds to cover personal obligations.
• Keep detailed records of all contributions, expenses, and income splits.
• Don’t use the investment in a way that benefits you personally outside of your ownership share.

Given the complexity of the rules, and the serious penalties for mistakes, it’s smart to work with professionals.

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Work With Professionals

Before partnering your IRA with personal funds, talk with your financial planner or CPA to make sure that your investment aligns with you long term goals. It’s also wise to speak with a tax advisor who knows the rules for self-directed retirement accounts. Having a clear, written partnership agreement can help ensure everything stays compliant.

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‍Conclusion

Partnering your IRA with personal funds can be a powerful way to grow your retirement portfolio and access bigger deals. But it must be done right, from structuring ownership at the start to managing every expense and distribution properly. When you follow the rules, you can enjoy more flexibility and potentially higher returns, all while staying within IRS guidelines.

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Ready to take control of your retirement strategy? 

At Mountain West IRA, we specialize in Self-Directed IRAs that give you the power to invest beyond the stock market, into real estate, private loans, precious metals, cryptocurrency and more. Whether you're considering a pre-tax or post-tax IRA, we can help you understand your options and answer any questions you may have. 

📞 Call us at 866-377-3311 or
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