Yes — a self-directed IRA Roth conversion is allowed, and the self-directed part changes nothing about the tax. Whatever you convert is added to that year's income. What matters is how much you convert at once: converting the whole account in one year can push you through several brackets, and the bill is due whether the investment rises or falls.

Can you convert a self-directed IRA to a Roth?

Yes — a self-directed IRA is still an IRA, so the same conversion rules apply as at any brokerage. "Self-directed" only describes what the account is allowed to hold — real estate or certain precious metals, for example — not how it is taxed.

Under IRC §408A(d)(3), a conversion is treated as a distribution from the traditional IRA: the converted amount is included in your gross income for that year, and the 10% additional tax on early distributions does not apply to it. The tax is triggered by the conversion itself, not by what the money is later invested in. Whatever you convert is taxed as income that year, whether you buy gold with it or leave it in cash.

Do you have to convert the whole account at once? No — you can convert all or part of a traditional IRA, and the amount is your choice every year. Spreading one large balance across several years of smaller conversions is what keeps a conversion from climbing several brackets at once. IRS Publication 590-A says it directly: you can withdraw all or part of the assets from a traditional IRA and reinvest them in a Roth IRA.

For the wider picture, see our Roth conversion tax planning guide.

What does converting it all in one year actually cost?

In a hypothetical 2026 single-filer example, converting $300,000 at once adds $88,157.25 of federal tax — $18,299.25 more than spreading the same $300,000 over three years.

Here is the hypothetical behind those numbers — a single filer with $70,000 of 2026 taxable income before any conversion (taxable income means after deductions), deciding whether to convert $300,000. Using the 2026 single-filer brackets in Rev. Proc. 2025-32, federal only:

The math, step by step:

• Tax on the $70,000 of other income alone: $10,112.
• All at once: converting $300,000 in 2026 makes taxable income $370,000. Tax is $98,269.25, so the conversion adds $88,157.25. The income climbs from the 22% bracket through 24% and 32% and into the 35% bracket.
• Spread out: converting $100,000 a year for three years, assuming the same $70,000 of other income and 2026 brackets each year, makes taxable income $170,000. Tax is $33,398 a year, so each conversion adds $23,286 — $69,858 over three years, never leaving the 24% bracket.
• Difference: $18,299.25 less federal tax by spreading, on these assumptions. Future brackets are inflation-adjusted, so the three-year total is an approximation, and state tax is separate.

Same $300,000 converted either way. I'd rather see a client convert in three smaller pieces than one big one — on these numbers, the bracket math agrees.

What happens if the investment drops after you convert?

The tax stays.

Last year a client came to me after converting his whole traditional IRA to a Roth inside a self-directed IRA so he could buy gold. Nobody had told him he could convert only part of it, or spread the conversion over several years. The full amount landed in a single year of income and pushed him up several tax brackets. The gold happened to roughly double within the year, so the gain more than covered the tax — but the bill never depended on the gold. Had the investment fallen instead, he would still have owed tax on the full converted amount. I saw him after the fact, on the tax side only, once the bill was due. Size the conversion first; buy second.

Can you undo a conversion if the investment drops? No. A conversion made in 2018 or later cannot be recharacterized — undone by treating it as if it had stayed in the traditional IRA. It is permanent the moment it happens. Before 2018 you could reverse a conversion and take the income back; the Tax Cuts and Jobs Act removed that, and both §408A(d)(6)(B)(iii) and Pub 590-A now state it plainly. The mechanics are in our post on whether you can reverse a Roth conversion (you can't).

Run the hypothetical's downside: the $300,000 converted all at once is invested and falls by half to $150,000. The added federal tax is still $88,157.25, because the tax is on the amount converted, not on what it is worth later. That is the risk in converting a large balance in one shot — the income is fixed on the day you convert.

How much should you convert each year — and how do you decide before the money moves?

Convert up to a bracket line you choose, each year, in separate conversions. There is no provision that lets you spread one conversion's income over multiple years — that two-year spread existed for 2010 only. "Spreading" means doing smaller conversions in separate years, filling the 22% or 24% bracket each time instead of blowing through three brackets at once.

The question I ask first is how much room is left in your current bracket — that room sets the year's conversion amount. Our post on how much to convert each year before RMDs was written for people sizing annual conversions in the years before required distributions begin, and the bracket-filling mechanics are the same here.

Two more checks before you convert. First, a conversion is not always worth doing at all — if your retirement bracket will be lower than today's, or you would have to pay the tax out of the IRA itself, read when a Roth conversion is not worth it first. Second, conversion income counts toward the income that sets your Medicare premiums; our post on Roth conversions and IRMAA was written for people on or near Medicare, and if that is you, read it before sizing the year's conversion.

Sizing a conversion before anything moves — the bracket room, the year's amount, the estimated payments — is the work our tax advisory and planning team does.

When is the tax on a conversion due?

A conversion creates income with no withholding unless you arrange it, so the bill is due through estimated payments during the year — not next April. One poster on the TurboTax Community asked the right question before converting:

"I plan on an IRA to Roth conversion at the end of 2025. This conversion will significantly increase my income and my income taxes for the year. Do I need to increase my regular monthly Fed tax deductions now to account for the anticipated increase in taxes for the year?"

The answer is a safe harbor — a payment amount that, if you pay it in on time, keeps the underpayment penalty off no matter what the final bill turns out to be. Under IRC §6654(d) and the 2026 Form 1040-ES, you are covered if your withholding and on-time estimated payments reach the smaller of 90% of your 2026 tax or 100% of the tax shown on your 2025 return — 110% if your 2025 adjusted gross income was over $150,000. That holds even when the conversion makes this year's bill much bigger. If you convert late in the year, the annualized income installment method on Form 2210's Schedule AI — a way to figure the required payments based on when in the year the income actually arrived — can match the payments to a late-year conversion, per the Form 2210 instructions. The conversion itself is reported on Form 8606, Part II.

What are your three options for getting retirement money into a self-directed Roth?

Three: move first and convert in pieces, convert first and move the Roth, or convert inside the self-directed account. Only the first lets you pick each year's conversion size after the money has moved. All three end in the same place, a Roth IRA at a self-directed custodian, but they differ in when the tax bill starts.

• Option 1: Move first, convert later in pieces. Do a trustee-to-trustee transfer of your traditional IRA into a self-directed traditional IRA — the old custodian sends the money straight to the new one, and it never passes through your hands — then convert whatever amount you choose each year. A direct transfer between custodians is not a rollover, is tax free, and is not subject to the once-a-year rollover limit, per Pub 590-A. Coming from a 401(k), ask the plan for a direct rollover to the new custodian: under IRC §402(c), money transferred to another eligible plan stays out of income, and Pub 590-A says that if any part is paid to you instead, the plan must withhold 20% of it before you ever see it. Whether your plan allows a distribution while you are still employed depends on the plan.
• Option 2: Convert first, then move the Roth. Convert to a Roth at your current custodian, pay tax this year on whatever you convert, then do a trustee-to-trustee transfer of the Roth to the self-directed custodian. That later move is tax free.
• Option 3: Convert inside the self-directed account. Open the self-directed traditional IRA, transfer the money in, then direct the same custodian to convert some or all of it to a Roth. Pub 590-A calls this a same-trustee transfer; the tax treatment is identical to any other conversion.

There is also the 60-day rollover, where the money passes through your hands and must be redeposited within 60 days under IRC §408(d)(3). It works, but it puts the deadline and the risk on you. I tell people to keep every move custodian-to-custodian — when a direct transfer is available, take it.

Option	When the tax starts	Watch for
Transfer to a self-directed traditional IRA, convert in pieces	Only when you choose to convert — each piece is taxed in its own year	Keep every move custodian-to-custodian; a 401(k) check paid to you loses 20% to withholding
Convert to Roth now, move the Roth afterward	Immediately — whatever you convert is income this year	Size the conversion before you sign; the Roth transfer afterward is tax free
Convert inside the self-directed account	When you convert, in whatever amount you direct	Same tax rules as any conversion; confirm the custodian supports Roth accounts

What are the rules for holding gold inside an IRA?

An IRA can hold gold only inside a narrow exception. The default rule in IRC §408(m) is that buying a collectible — which includes any metal or gem — is treated as a distribution of whatever the IRA paid for it. The exception covers certain coins and bullion, but only if the metal is in the physical possession of the IRA's trustee.

IRS Publication 590-B puts it in plain English: your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, one-ounce silver coins minted by the Treasury Department, certain platinum coins, and certain gold, silver, palladium, and platinum bullion. Then the caution: the coins must be in the possession of the custodian or trustee, and if the owner takes possession, the coins are treated as distributed.

Can you keep your IRA's gold at home? No. The IRS says bullion must stay in the physical possession of a bank or an IRS-approved nonbank trustee, and taking it home — even through an IRA-owned LLC — is treated as a distribution. That comes straight from the IRS's own IRA FAQ page, which also notes the FAQ is guidance, with §408(m) as the underlying law.

One short aside on how this goes wrong. In McNulty v. Commissioner, 157 T.C. No. 10 (2021) — the full opinion is on the Tax Court's public docket — Mrs. McNulty's self-directed IRA, through an LLC she managed, bought 320 one-ounce American Eagle gold coins for $374,000. The coins were shipped to the couple's home and kept in a safe, after an online promoter's website advertised that IRA owners could keep the coins at home without tax consequences. The court held the coins were a taxable distribution the moment they arrived and sustained accuracy-related penalties: "An owner of a self-directed IRA may not take actual and unfettered possession of the IRA assets." That was a custody case, not a conversion case — but it is the same reader, and the same lesson: a seller's website is not tax advice.

To be clear about our lane: we do not sell gold, recommend metals dealers, or act as an IRA custodian. Our side of this is the tax.

What changes when you convert gold or other non-cash assets?

The asset itself can move into the Roth in kind — the gold goes over as gold, without being sold for cash first — and it counts at its fair market value. The custodian reports the conversion to the IRS on Form 1099-R even when nothing leaves the account, per the 2026 instructions for Form 1099-R.

The rule behind that is in Pub 590-A: you must roll over into the Roth IRA the same property you received from the traditional IRA. For gold or any other non-cash asset, the value used for the conversion is the number that lands in your income.

One more wrinkle if any of your traditional IRAs holds after-tax (nondeductible) money: the tax-free share of a conversion is figured in proportion to the after-tax money across all of your traditional IRAs as of December 31 under IRC §408(d)(2) — the "pro-rata rule." Moving money to a self-directed custodian does not create a separate pot, and Form 8606 does the math. Our Form 8606 and pro-rata rule post was written for backdoor Roth savers, but the pro-rata math is the same.

What else can disqualify a self-directed IRA?

Self-dealing. IRC §4975 bars prohibited transactions between your IRA and a disqualified person — you, your spouse, your parents and children, and others close to the account. Pub 590-B lists the everyday versions:

• Borrowing money from the IRA
• Selling property to it
• Using it as security for a loan
• Buying property for personal use, present or future, with IRA funds

The consequence is out of proportion to the mistake: under §408(e)(2), the account stops being an IRA as of the first day of that year, and the entire account is treated as distributed to you at fair market value — not just the piece you touched. Pub 590-B adds that IRAs invested in nonpublicly traded assets, or assets you directly control, carry a higher risk of stumbling into one of these. The more control you hold, the more these rules matter.

What else do people ask about a self-directed IRA Roth conversion?

Thinking about converting a self-directed IRA to a Roth before year-end? N&T Tax & Advisory Group sizes conversions before the money moves — modeling the brackets, setting each year's amount, and handling the tax side only, by phone or video, nationwide. Book a meeting with our team here.