Since gold IRAs are unique, in that they hold physical coins or bullion instead of paper assets such as stocks, bonds or mutual funds, there are some additional gold IRA rules that must be taken into account when setting one up.
An individual retirement account is a long term investment strategy that provides tax incentives for retirement savings. In the United States, the Internal Revenue Service, the government agency that monitors taxation, has set strict guidelines about funding and maintaining various types of IRAs.
While the term “gold IRA” may imply that gold is the only investment option, this is actually an umbrella term for an account that contains the three other types of precious metals that are approved by the IRS. Investors looking for the benefits of owning physical metals inside their retirement account can also choose to hold various types of silver, platinum or palladium, or some combination of the four.
Here we will cover the major gold IRA rules you should be aware of.
Gold IRA Rules For Precious Metals
One of the critical gold IRA rules has to do with the type of IRA required to hold physical metals. The IRS makes it clear that only a self directed IRA is allowed.
There are various types of self directed IRAs that can be created for the purpose of investing in gold, so account holders still have some choices with respect to the specific features of their new IRA.
If you would like to read more on the IRS requirements, you can view the publication 590 available on irs.gov.
Funding Rules For Gold IRAs
Gold IRAs share the same tax advantages as their more traditional counterparts since they were designed to be a tax-deferred retirement savings account. This means that you can transfer or rollover funds from a previously-created retirement plan, like a 401k, into a self directed gold IRA without paying taxes on your investments or incurring any additional tax penalties.
Besides IRA transfers and rollovers, you can make other deposits to your IRA through an annual contribution. The IRS has some gold IRA rules governing the amount and type of contributions that can be made.
For example, in 2022, the maximum contribution allowed for individuals under age 50 is $6,000, and for those who will be 50 or over by the end of 2022, it is $7,000. Additionally, any contribution must be made in cash. Once the cash transfers and contributions are placed in your account, you can begin to make your investments by directing your custodian to purchase precious metals. It is not permissible to use coins already in your possession to fund a new gold IRA.
The IRS rules about funding can lead to serious consequences if violated. In fact, if you are caught trying to transfer any other asset besides cash or cash equivalents into an IRA, the IRS has the right to disqualify your account from its beneficial tax treatment.
Gold IRA Rules For IRA Conversion Types
IRA types that are allowed to be converted to precious metals:
Precious Metals Allowed in an IRA
The IRS has strict guidelines about what kinds of precious metals can be held in a gold IRA. Only gold, silver, platinum and palladium are allowed, and there are still limitations on specific types and fineness of metals that can be included.
IRA Approved Bullion and Coins
IRS regulations allow the following gold coins or bullion to be held in a IRA:
Gold Bars/Coins/Rounds:
The above list are the only acceptable forms of gold that can be held. Additionally, any gold must be at least 0.995% plus (24k) solid gold in order to be included in a precious metals IRA.
However, the IRS makes an exception for gold that falls below this standard if it is a coin minted in the United States. Silver, palladium and platinum each have their own set of specifications, including types allowed and fineness standards that must be met, with a few exceptions.
IRS regulations allow the following silver coins or bullion to be held in a IRA:
Gold IRA Rules For Fineness Requirements
The fineness standards (or purity grade) of metals need to meet the following standards:
IRS regulations allow the following silver coins or bullion to be held in a IRA:
Note: The account executive at the gold IRA company you choose to work with will make sure you select only approved metals for your gold backed IRA and will usually have multiple options available.
Gold IRA Rules For Storing Your Precious Metals
Gold IRA rules of maintaining your precious metals you purchase state that they be held by a qualified custodian or trustee, rather than you, the IRA owner. If you maintain possession of the precious metals in which you have invested, the IRS considers that a distribution, and your investment is then taxable.
Additionally, custodians or trustees are not required to offer every possible type of investment plan. This means that some custodians may not offer gold IRA storage, so it is important to find a reputable trustee that offers the specific type of investing option you are interested in.
Liquidating Your Gold IRA Assets
If you decide that you no longer want to keep a gold IRA open, you have two choices:
If you choose to liquidate prior to withdrawal, the normal IRA tax rules apply and you pay an income tax on the withdrawal. However, if you choose to take physical possession of the gold or precious metals, you must pay an income tax on the value of the metals at the time you take possession, and then you must pay a 28% capital gains tax on the gold when you liquidate it in the future.
Like a traditional IRA, the gold IRA rules have strict procedures in place governing when you can liquidate your assets or take possession of the precious metals. The general gold IRA rules maintain that you must reach at least 59 ½ years of age before you can liquidate any IRA and take advantage of the tax benefits associated with that money. The same standard is true for gold IRAs. However, there are exceptions available if you can show hardship as defined by the IRS, including needing additional funds for tuition, healthcare or disability.
Gold is a smart investment for many reasons and understanding the gold IRA rules and procedures for setting up a precious metals IRA will help you decide if it’s right for you.
If you decide you want to learn more about gold IRA investing be sure to read our company reviews on our Top Gold IRA Companies Reviews page.
