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A traditional IRA is a tax-deferred retirement account. Money can go in pre-tax, it grows tax-deferred, and tax is generally paid when funds come out in retirement. A self-directed version follows those same rules to the letter.
The IRS does not have a separate account type called a self-directed IRA. The phrase just describes a traditional IRA held at an administrator that allows assets beyond publicly traded funds. The tax treatment, the contribution limits, the distribution rules, all of it carries over from a standard traditional IRA. What opens up is the menu of options.
It is easier to start with what an IRA cannot hold. The IRS names a short list of off-limits items: life insurance, collectibles (art, antiques, most gems, certain coins, alcoholic beverages), and S-corporation stock.
Outside of those, the range is wide. People use self-directed traditional IRAs to hold assets such as:
Mountain West IRA does not tell anyone what to put in an account. The account holder makes that call based on what they know. Our role is to administer the account and keep the paperwork straight.
For 2026, the total you can contribute across all of your traditional and Roth IRAs combined is $7,500 if you are under 50, and $8,600 if you are 50 or older (that includes the $1,100 catch-up). For 2025 the numbers were $7,000 under 50 and $8,000 for 50 and up.
A few things people search for around this:
Contributing to a traditional IRA does not automatically make the contribution deductible. Deductibility depends on your income and whether you or a spouse have a workplace retirement plan. Here are the 2026 phase-out ranges:
Below the range, the contribution is generally fully deductible. Inside the range, it phases down. Above it, no deduction, though a non-deductible contribution is still allowed. Your own numbers are a conversation for a tax professional.
This is where self-directed accounts trip people up, so it gets the most attention. Under IRC Section 4975, an IRA cannot transact with disqualified persons. That list includes you, your spouse, your parents and grandparents, your kids and grandkids and their spouses, and any company that group controls at 50% or more.
In plain terms, the account exists for the future benefit of the IRA, not for your benefit today. A few examples of what that blocks:
The penalty is heavy. A prohibited transaction can disqualify the entire account as of January 1 of the year it happened, with the whole balance treated as distributed and taxed. People lose the whole tax shelter over a shortcut.
Traditional IRAs carry required minimum distributions. As of 2026, RMDs start at age 73. The account holder takes a minimum amount each year, and the administrator can usually help with the recordkeeping.
This gets more involved when the account holds something illiquid like real estate. You cannot withdraw the kitchen. A couple of ways people handle it: keeping a cash reserve in the account from rental income or distributing a percentage interest in the property to satisfy the RMD. Planning for liquidity ahead of an RMD year is the part most people overlook.
The mechanics are simpler than people expect. You open the account with an administrator, fund it through a contribution, transfer, or rollover from another retirement account, and then direct the account to acquire the asset. Title and funds run through the IRA, never through you personally. That last part is what keeps the account compliant.
A self-directed traditional IRA is the same tax wrapper most people already recognize, with a wider set of options for what goes inside. The rules around contributions, deductions, prohibited transactions, and RMDs are where the details live, and they are worth understanding before any account is funded.
Every situation is different, so talk with your own financial advisor about your exact circumstances before you act.
What is a self-directed traditional IRA?
It is a traditional IRA held at an administrator that allows assets beyond publicly traded stocks, bonds, and funds. The tax rules are identical to any traditional IRA. The difference is the range of options the account can hold.
What can a self-directed traditional IRA hold?
Common options include real estate, private notes and lending, precious metals that meet IRS fineness standards, and private company shares or fund interests. The account holder chooses, based on what they know.
What can it never hold?
Life insurance, collectibles (such as art, antiques, most gems, certain coins, and alcoholic beverages), and S-corporation stock.
How much can I contribute in 2026?
Up to $7,500 if you are under 50, and $8,600 if you are 50 or older, which includes the $1,100 catch-up. That total is combined across all of your traditional and Roth IRAs.
Is my contribution tax-deductible?
Not always. Deductibility depends on your income and whether you or a spouse have a workplace retirement plan. The 2026 phase-out ranges are listed above. Check the numbers with a tax professional.
Who counts as a disqualified person?
You, your spouse, your parents and grandparents, your kids and grandkids and their spouses, and any company that group controls at 50% or more. Your IRA cannot do business with any of them.
Can I live in or use a property my IRA owns?
No.Using a property the account owns, even briefly, is a prohibited transaction because it benefits a disqualified person today. The same applies to letting close family use it.
Do I have to take required minimum distributions?
Yes. Traditional IRAs have RMDs starting at age 73. If the account holds something illiquid like real estate, plan for liquidity before that year.
How do I open and fund one?
Open the account with an administrator, then fund it through a contribution, a transfer from another IRA, or a rollover from an old workplace plan. From there you direct the account to acquire the asset, with funds and title running through the IRA.
Does Mountain West IRA give investment advice?
No. Mountain West IRA is a self-directed IRA administrator. We handle account setup, paperwork, and recordkeeping. We do not give investment, tax, or legal advice. Talk with your own financial advisor about your exact situation.
To keep learning, visit our educational videos library on YouTube.
Mountain West IRA can help you open a Self-Directed IRA or Solo 401(k), so you can make decisions in what you know best.
📞 Call us at 866-377-3311 or 📅 Schedule your free consultation
You can explore our educational content on our YouTube channel and visit our blogs.
If this topic sparked questions, reach out to our team. We are here to help you understand the rules, the process, and how self-directed retirement accounts work.
Mountain West IRA is a self-directed IRA administrator based in Boise, Idaho. We handle account setup, paperwork, and recordkeeping. We do not provide investment, tax, or legal advice. Always check with your own financial advisor about your exact situation.
This post is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor for personalized advice.
Mountain West IRA, Inc. does not render tax, legal, accounting, investment, or other professional advice. If accounting, tax, legal, investment, or other similar expert assistance is required, the services of a competent professional should be sought.
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