Can I live in a property my IRA owns?

No. This is the cleanest no in the entire subject, and it is worth understanding why, because the reasoning explains a dozen other rules.

Why market rent does not fix it

The instinct is that a prohibited transaction is about unfairness. Pay a fair price and there is no harm, so there should be no violation.

That is not how the statute is built. Section 4975 prohibits the use of plan assets by or for the benefit of a disqualified person. The word is use. Not underpriced use, not unfair use. Use.

You got a place to sleep. Your account is an asset of a retirement plan. A disqualified person benefited from plan property. That is the complete analysis. The rent you paid is irrelevant to whether the prohibition was triggered, and in fact writing a rent check creates a second problem, because it is a transaction between the plan and a disqualified person, which is separately prohibited.

What counts as personal use

More than living there:

• Spending a night, or an afternoon
• Vacationing in it, even for a weekend, even in the off season
• Storing anything of yours in it, including in the garage or a basement corner
• Parking in the driveway regularly
• Letting your spouse, parents, children, grandchildren, or the spouse of a child use it, at any price
• Using it as a mailing address or a home office
• Staying in it while you work on it

And a related one that catches people converting a property: you cannot buy a property from your IRA in order to move into it. That is a sale between the plan and a disqualified person.

Who else is barred

Every disqualified person. Your spouse, your parents and grandparents, your children and grandchildren and their spouses.

Your siblings are not disqualified persons, so a sibling renting from the account is not prohibited on the family tree analysis. It still has to be genuinely arm's length at market rent, and if the arrangement exists to do you a favor rather than to benefit the account, the self-dealing provisions can still reach it. Do not rely on this without an opinion.

The consequence

Not a fine. Not a penalty on the amount involved. The account ceases to be an IRA as of the first day of that taxable year, and the entire balance is treated as distributed to you on that date.

Ordinary income tax on the whole balance. A 10% additional tax on all of it if you were under 59 and a half. If the use happened in a prior year, amended returns, interest, and possibly accuracy penalties on top.

A three night stay in a beach condo can cost a six figure retirement account. That ratio is the reason this page exists.

The version that is allowed

Buy the vacation property inside the IRA. Rent it to unrelated tenants at market rates, with a real property manager, for as long as you hold it. Never set foot in it as a guest.

Then, in retirement, take the property as an in-kind distribution. You pay income tax on its fair market value at the time of distribution if it is a traditional IRA, or no tax at all if it is a Roth and you are qualified. After the distribution the property is yours personally, and you can do whatever you like with it.

That path is well trodden and entirely legitimate. It requires patience and an honest valuation at distribution, since that number sets your tax. What it does not tolerate is using the property in the years before.

If you already did it

Do not try to unwind it quietly, and do not assume small means safe. Call a tax attorney who does prohibited transaction work, before you file anything else. There is no self-correction program that restores a disqualified IRA, but there is a meaningful difference between how these situations resolve with early professional handling and how they resolve when discovered in an audit years later.