Can You Hold Gold in an IRA?

Individual Retirement Accounts (IRAs) allow investments to grow with tax advantages. While many IRAs focus on paper assets, IRS regulations permit certain physical precious metals, including gold. This offers a unique avenue for portfolio diversification. Holding physical gold within an IRA, however, requires adherence to specific IRS rules.

Self-Directed IRAs for Precious Metals

Investing in physical precious metals through an IRA is only possible with a Self-Directed IRA (SDIRA). Unlike traditional IRAs that limit investments to publicly traded securities, an SDIRA expands permissible assets. SDIRAs allow for alternative investments like real estate, private equity, and physical precious metals, offering greater flexibility.

An SDIRA allows the account holder to direct investment choices, while a specialized custodian manages administrative aspects. Traditional IRA custodians do not offer physical precious metal investments, making an SDIRA necessary. Establishing an SDIRA with a qualified custodian facilitates the purchase and handling of precious metals as directed by the account holder. The account holder controls investment decisions, but does not directly hold the physical assets.

Eligible Precious Metals and Purity Standards

The IRS has rules regarding eligible precious metals and their purity standards for IRA inclusion. Only specific forms of gold, silver, platinum, and palladium are eligible.

For gold, a minimum fineness of 99.5% is required (American Gold Eagles are an exception). Eligible gold products include American Gold Buffaloes, Canadian Gold Maple Leafs, and bullion bars from accredited refiners. Silver must meet a minimum purity of 99.9%, with eligible forms like American Silver Eagles and Canadian Silver Maple Leafs. Platinum and palladium both require a minimum fineness of 99.95%, with eligible examples including American Platinum Eagles, Canadian Platinum Maple Leafs, and bars from approved refiners. Collectibles, such as rare coins or jewelry, are not permitted.

Custodianship and Approved Storage

All precious metals held within an IRA must be managed by an IRS-approved custodian and stored in an approved depository. IRA owners cannot take direct physical possession of these metals. The custodian ensures IRS compliance, facilitates metal purchases, and arranges secure storage.

Approved depositories are secure vault facilities designed to protect valuable assets. These facilities maintain high standards for security, accounting, and insurance, safeguarding metals against theft or damage. Metals are held “for the benefit of” the IRA owner, meaning the owner maintains beneficial ownership, but physical assets remain under the custodian and depository’s control. This arrangement ensures compliance with IRS regulations, which mandate third-party possession to maintain the IRA’s tax-deferred status.

Understanding Prohibited Transactions

Engaging in “prohibited transactions” with an IRA can lead to significant tax penalties and account disqualification. These transactions involve self-dealing or personal use of IRA assets. A key prohibited transaction for precious metals IRAs is direct physical storage of metals by the IRA owner, whether at home or in a personal safe deposit box. The IRS views such actions as a taxable distribution of the entire IRA.

A prohibited transaction results in the IRA being treated as if all assets were distributed on the first day of the transaction year. The fair market value of the entire IRA becomes fully taxable as ordinary income. If the IRA owner is under age 59½, a 10% early withdrawal penalty may apply. Other prohibited actions include borrowing from the IRA using the metals as collateral or selling personal assets to the IRA. Strict adherence to IRS rules is necessary to preserve the tax benefits of a precious metals IRA.