Can I do repairs on a rental my IRA owns?

No. This is the rule that ends more self-directed real estate plans than any other, because it removes exactly the thing that makes many investors good at real estate.

Why free labor is a violation

The instinct is that a prohibited transaction requires taking something. Giving should be fine, and giving for free should be better than fine.

Section 4975 does not read that way. It prohibits furnishing goods, services, or facilities between a plan and a disqualified person. Between. Either direction. There is no exception for generosity and no exception for zero price.

The reasoning, to the extent it helps: your labor has value. Putting it into the account without a contribution is a transfer of value outside the contribution rules, which are how Congress controls how much tax advantaged money you can accumulate. If sweat equity were allowed, a contractor could build a portfolio inside a Roth IRA with a few thousand dollars of cash and ten years of weekends, entirely tax free, which is a considerably better deal than the contribution limits contemplate.

What is out

• Painting, patching, tiling, roofing, plumbing, electrical
• Mowing, landscaping, snow removal, gutter cleaning
• Cleaning between tenants
• Hauling debris, making dump runs
• Assembling or installing appliances
• Acting as the general contractor coordinating subs
• Doing the property's bookkeeping in any substantive way

What is in

You are the account's decision maker. Directing the account is not the same as furnishing services to it. You can:

• Decide to buy, decide to sell, set the price
• Choose the property manager, the contractor, the insurer, the lender
• Approve or reject a bid
• Set the rent and approve a lease
• Sign directions to the custodian
• Visit to inspect your account's asset, the way any owner inspects a holding

The line sits between deciding and doing. Approving a $9,000 roof bid is deciding. Carrying a bundle of shingles up the ladder is doing.

The middle of that spectrum is genuinely grey. Meeting three contractors, collecting bids, and picking one looks like ordinary owner diligence. Running the job day to day, scheduling subs, and inspecting their work looks like general contracting, which is a service people get paid for. Stay on the deciding side of the line, keep a property manager between you and the trades, and the question rarely comes up.

The 9pm problem

Here is how this actually goes wrong, and it is almost never a renovation.

A pipe bursts on a Friday evening. The tenant is calling you. The custodian is closed until Monday and takes three business days to process a disbursement. The plumber wants a card number now.

You give him your card. You are going to reimburse yourself from the account next week. You have just committed two prohibited transactions: furnishing services and goods to the plan, and extending credit to it. The reimbursement is a third, a transfer of plan assets to a disqualified person.

That is an entire retirement account, over a $900 pipe, in an emergency where you did the responsible thing.

How to make the 9pm problem impossible

Keep real cash in the account. Not a token balance. Six months of operating expenses plus the replacement cost of the most expensive single system in the building. This is the whole solution, and people skip it because idle cash feels inefficient.

Use a property manager with authority. A manager who can spend up to an agreed threshold from the account's funds without a new direction each time removes you from the emergency path entirely. Their fee, seven to ten percent of collected rent, is not an expense to minimize here. It is the compliance structure.

Tell the manager what the account is. They need to know that the owner is a retirement account, that invoices are addressed to the custodian, that you cannot be billed personally, and that they cannot accept your card in a pinch.

Underwrite the real cost. Management, a lawn service during vacancy, a turn service between tenants, and a reserve. A deal that only works if you supply free labor is a deal your IRA cannot do. That is not a rule to work around. It is information about whether this asset belongs in this account.

The mental model

The IRA is a stranger who happens to trust you. You do not spend your Saturday reroofing a stranger's house for free, and you do not put a stranger's emergency plumbing on your personal card. If the action would be odd on behalf of an actual stranger, it is prohibited on behalf of the account.