Gold IRA Tax Rules
Gold, silver, platinum, and palladium can be purchased by individual retirement accounts (IRA). Gold IRAs refer to self-directed IRAs that contain the aforementioned metals.
Self-directed IRAs allow for the custodian to hold several different assets in one account. Typically, gold IRAs are created with gold IRA companies who can then manage your coins and bars, buying and selling as needed. There are several rules and regulations surrounding gold IRAs that you should know before beginning to invest.
Acceptable Metal Purchases
To comply with gold IRA tax rules, any precious metals that are purchased must be bars or coins that the IRA deems acceptable. Other investments can trigger an excise tax, or worse, cause your IRA to lose IRA status.
By and large, any precious metals purchased must be 99.9% pure, though some coins come with exceptions. Coins must be bullion or certain pre-approved proofs, meaning numismatic coins are not allowed. The most common acceptable forms include:
- American Gold Buffalo (uncirculated; no proofs)
- American Gold Eagle (bullion or proof coins)
- Austrian Gold Philharmonic
- Australian Kangaroo/Nugget
- Canadian Gold Maple Leaf
- Chinese Gold Panda
- Gold rounds or bars from a mint or refinery approved by COMEX or NYMEX over 99.9% purity
- American Silver Eagle (bullion or proof coins)
- Australian Silver Kookaburra
- Austrian Silver Philharmonic
- Canadian Silver Maple Leaf
- Chinese Silver Panda
- Mexican Libertad
- Any silver rounds or bars from a mint or refinery approved by COMEX or NYMEX over 99.9% purity
- American Platinum Eagle (proofs acceptable)
- Australian Platinum Koala
- Canadian Platinum Maple Leaf
- Isle of Man Noble
- Any platinum rounds or bars from a mint or refinery approved by COMEX or NYMEX over 99.9% purity
- Canadian Palladium Maple Leaf
- Any palladium rounds or bars from a mint or refinery approved by COMEX or NYMEX over 99.9% purity
The withdrawal rules for gold IRA are slightly different for traditional vs Roth IRAs.
Traditional IRA Withdrawal Rules
Traditional IRA contributions are considered tax-deductible, but when withdrawing precious metals or money from the traditional IRA, taxes are owed. However much you choose to withdraw is considered part of your annual gross income. This means that it must be taxed with ordinary income tax. There is also a penalty for withdrawing early. If you withdraw before the age of 59 1/2, you must pay 10% as a penalty.
This penalty can be avoided in certain situations. For example, paying for a first home is an exemption on the 10% penalty. Another common exemption is purchasing medical insurance while unemployed. You may also avoid the penalty by setting up an annuity that is based upon your life expectancy.
Another penalty that is triggered is not taking distributions by the age of 70 1/2. If you pass 70 1/2 years old, you will face a 50% excise tax on however much you failed to withdraw each year.
Roth IRA Withdrawal Rules
Roth IRA contributions are not tax-deductible. However, they are tax-free when withdrawing, unless meeting one of two circumstances. When the account is less than five years old, or if you are under the age of 59 1/2, then any earnings will be taxed and penalized.
The exemptions for penalty are the same as with traditional IRAs. Any other distributions are considered both tax- and penalty-free. These IRAs also do not require minimum distributions beginning at any age.
Death allows all taxes and penalties on the remaining IRA balance to no longer apply to you. However, beneficiaries may be taxed. Roth IRAs remain tax-free when inherited.
The 10% penalty no longer applies when inheriting an IRA from someone who has passed away before the age of 59 1/2. Roth IRAs still must mature to 5 years before withdrawing to avoid penalty.
It is possible to spread withdrawals from inherited IRAs to help reduce how much tax must be paid annually. They can be withdrawn over a five-year span or may be longer, based on relationship to the deceased, age, and more.
Precious metals can be cashed in before withdrawal or can be withdrawn directly. When withdrawing the precious metals as is, taxes will be determined by the current value of those metals. By speaking to an accountant and a metal dealer who is familiar with gold IRA tax rules, you can create a plan that works best for you, your needs, and your plans.