Every January, self-directed IRA holders get a request that’s easy to put off: send us your year-end valuation. It can feel like one more piece of paperwork during an already busy season. But that single number plays a bigger role than most people realize. It determines how much you’re required to withdraw, what’s reported to the IRS, and whether your retirement plan is built on accurate information.
Here’s why your December 31 value matters, what to send, and when.
Why December 31 Is the Date That Counts
Your required minimum distribution is calculated by taking your account’s fair market value as of December 31 of the prior year and dividing it by a life expectancy factor from the IRS tables. In other words, the value of your account at the end of 2026 determines the RMD you’ll need to take in 2027.
For an account holding stocks and mutual funds, that number is automatic. The market sets the price every day. But when your IRA owns a rental property, a private note, or an interest in an LLC, there’s no ticker symbol to check. Someone has to determine what those assets are worth, and that process starts with you.
Why an Accurate Value Protects You
It might be tempting to send a rough estimate, or to leave last year’s number in place. Here’s why it’s worth getting right.
- Your RMD depends on it. If your value is too low, your calculated RMD will be too low, and you could end up under-distributing without realizing it. Missed RMD amounts can trigger an IRS excise tax. If your value is too high, you’ll withdraw more than necessary and pay tax on money that could have stayed invested.
- It’s reported to the IRS. Each year, custodians report the fair market value of every IRA on Form 5498. For hard-to-value assets like real estate and private investments, that reporting includes additional detail about the type of asset. The value you provide becomes part of your account’s official record.
- It affects other decisions. Your year-end value also comes into play for in-kind distributions, Roth conversions, and your beneficiaries’ planning down the road. An accurate number gives you and your advisors a clear picture to work from.
What to Send, by Asset Type
The right documentation depends on what your IRA owns. Here’s a general guide.
- Real estate. A current estimate of the property’s fair market value as of December 31. Supporting documentation might include [MidAtlantic IRA’s accepted formats, such as an appraisal, broker price opinion, or comparative market analysis].
- Promissory notes. The unpaid principal balance as of December 31, along with the payment status of the loan. If the borrower is behind on payments or the note is in default, let us know, since that can affect the note’s value.
- LLCs and checkbook IRAs. A year-end statement for any bank account held by the LLC, plus the value of any assets the LLC owns, such as real estate or notes. Remember, cash sitting in your LLC’s checking account is part of your IRA’s value too.
- Private placements and funds. A year-end statement or valuation letter from the sponsor or fund manager. Many sponsors provide these automatically, but it’s worth checking that they’re sending them to us.
- Precious metals. A year-end statement from the depository holding your metals.
A Few Tips for a Smooth Process
- Use independent, documented values when possible. A value supported by a third party, like an appraiser or a real estate professional, is stronger than a personal estimate. Keep a copy of whatever documentation supports your number.
- Be consistent. Using a similar method each year makes your values easier to compare and explain.
- Don’t wait for us to ask. If you know you’ll need an appraisal or a statement from a sponsor, request it in December so it’s ready when the new year starts.
- Tell us about major changes. If a property sold, a note paid off, or an investment lost significant value during the year, let us know so your records reflect it.
When to Send It
Each year, MidAtlantic IRA sends a valuation request to account holders with alternative assets. Custodians are required to provide RMD information to account holders early in the year, and fair market value reporting to the IRS follows by late spring. Receiving your valuation promptly means your RMD calculation and your tax reporting are accurate from the start.
If we don’t receive an updated value, the older number may not reflect your asset’s current worth, which is one more reason to send an update.
Your Year-End Valuation Checklist
- Identify every asset held in your IRA or IRA-owned LLC.
- Request any appraisals, sponsor statements, or bank statements in December.
- Confirm note balances and payment status as of December 31.
- Gather supporting documentation for each value.
- Send everything to MidAtlantic IRA to update your account.
- Keep copies for your own records.
How MidAtlantic IRA Can Help
Valuations can feel intimidating, especially the first time. Our team is happy to walk you through what we need for your specific assets and answer questions along the way.
As always, we recommend working with your CPA, appraiser, or financial advisor to determine the value of your assets. MidAtlantic IRA doesn’t provide tax, legal, or investment advice, but we’re here to make the process as simple as possible.
Not sure what to send for your account? Schedule a call with our team and we’ll help you sort it out.