Gold IRA Tax Rules

Gold IRA Tax Rules Investors Need To Know in 2023

The secret is out! If you want to beat inflation and secure your financial future, you better open a gold IRA account and invest in physical gold and other precious metals.

In the wake of the economic uncertainty and rampant inflation we are currently experiencing, a lot of investors have begun looking towards gold investments as a possible solution to safeguard one’s retirement account.

However, as much as it is beneficial to open a self-directed IRA for yourself, it is not as straightforward as simply buying gold and keeping it in your house. Gold is a very precious commodity and, as such, a lot of regulations govern its trade, use, and storage.

One of the issues you will have to deal with is you have to pay taxes for the physical precious metals that are part of your gold IRA. Unlike a traditional IRA or Roth IRA account, a lot of the tax benefits you were used to enjoying do not apply to physical gold.

Having said that, with the value of gold mining stocks and other commodities on the rise, investing in gold is still the best course of action regardless of any tax rules and penalties you may incur.

With the right management, your gold IRA can prove to be one of the most profitable investments you have ever made. If you are looking for information on gold IRAs and related tax rules, you are in the right place. Read on to learn more about this investment opportunity.

A Deeper Look at How a Gold IRA Works

A gold IRA is just like any other retirement account in that you will be investing funds based on specific tax agreements according to how you handle your withdrawals and distributions.

The only difference is that, unlike other investment portfolios that deal in currency or paper assets, a gold IRA is based on precious metals, such as gold, silver, platinum, and palladium. The value of these metals will determine the value of your gold IRA.

A gold IRA also gives you greater control over your account in return for having fewer tax benefits than, say, a traditional IRA. This is why it is sometimes referred to as a self-directed IRA and is mostly used as a way to diversify one’s retirement account rather than as a sole investment option.

Types of Gold IRAs

Types of Gold IRAs

There are three main types of gold IRAs that you need to consider before picking the best option for your needs, based on the following individual circumstances:

  • Amount of funds available

  • Age to retirement

  • Preferred tax benefits


This type of self-directed IRA is mostly reserved for businesses and self-employed investors. A SEP gold IRA not only offers higher contribution limits, but your contributions are also not taxed as ordinary income tax. You are allowed to contribute up to $53,000 or 25% of your income.

Roth Gold IRA

Just like any ordinary Roth IRA, in a Roth gold IRA, your contributions are not tax deductible. However, you can look forward to tax-free withdrawals in the future, as long as you hold off until you retire at 60 years of age.

Traditional Gold IRA

This type of gold IRA is tax-deferred, meaning your contributions and gains are not taxed, or at the very least, they are tax deductible. There is a $5,500 annual contribution limit set by the IRS. You will be expected to pay taxes on distributions upon retirement.

Is My IRA Account Eligible?

If you already have an individual retirement account and are considering diversifying to physical gold investments and other precious metals, the first thing you will want to look at is whether your account is eligible for such a move.

The majority of IRAs are eligible; meaning the only thing you will have to confirm is whether your account allows a rollover or just a transfer. You are usually allowed one rollover per year for a self-directed IRA.

Other accounts, such as a 401k, 403b, 457b, and Thrift Savings Plan (TSP) will have to make do with a transfer, which will mean having to pay transfer fees.

To determine which rules apply to your account, you will have to approach a financial advisor from a reputable IRA custodian.

Gold IRA Tax Rules To Consider

Gold IRA Tax Rules To Consider

Gold coins, physical gold, and other precious metals have the potential of being very profitable for investors who pay taxes and avoid tax penalties that may eat away at their returns.  You need to adhere to the rules and regulations of gold IRAS.

Physical Gold Taxes and Penalties

In terms of taxes and penalties, gold investments are listed under collectibles, which would put you in the same bracket as someone collecting art or other similar items. This is actually bad news for those who own gold IRAs because this type of tax treatment is one of the highest there is.

However, there are always one or two ways to make the best of such a tough tax situation, such as when you buy gold and other physical precious metals and only keep them for less than a year. This would mean the investment qualifies as short-term capital gains.

Holding on to your physical gold and precious metals for more than a year would disqualify your investment from being called short-term capital gains. You will then end up paying a lot of taxes on the gold IRA accounts.

Precious Metals IRA Taxation

Gold IRAs are investment vehicles that allow you to avoid a lot of taxes by only being taxed when you decide to start withdrawing money from the account. This is a recent development that was implemented in 2007 when the IRS stopped considering a gold IRA as a collectible.

Ever since this landmark change by the IRS, a lot of shrewd investors have been taking advantage of it to grow their profits through investing in gold.

There are, however, some restrictions that the IRS put in place to control gold investments in such individual retirement accounts. One of these is that you are not allowed to keep the physical precious metals that are part of your self-directed IRA. The only solution is to store your gold at an IRS-approved depository storage facility, which will mean some extra storage fees.

Other factors that you need to understand completely before investing in gold include:

  • Investment losses can’t be deducted from taxes

  • Early withdrawals (before the age of 60) will meant you have to pay an early withdrawal penalty

  • At 70 years old you will have no choice but to start withdrawing money from the account

  • The amount you get taxed as ordinary income depends on your income bracket

  • A very high-income bracket will result in you being taxed over 28%

  • The best advice on how to set up, manage, and pay taxes on your account can be found by approaching a reputable broker or gold IRA custodian

Gold IRA Tax Rules on Withdrawals

Tax on withdrawals

As you approach retirement, you will no doubt be eager to start withdrawing the money you have invested in your precious metals IRA investments for so many years.

However, withdrawal also has its own set of rules that need to be adhered to according to the type of gold IRA account you have, such as:

Roth gold IRAs

Roth gold IRAs do not have minimum distributions at any age. As long as you are over the age of 59 and the Roth gold IRA accounts are over five years old, they remain completely tax-free. However, you are at risk of facing severe penalties if you withdraw money in any way that violates these conditions.

Traditional IRAs

Withdrawals from a traditional IRA are tax-deductible, which means you must pay tax each time you take money from the account. The total amount of taxes you are charged will be added to your annual income tax.

One of the most important things to remember is that any withdrawals made before you turn 60 will result in a 10% penalty being imposed on the value of your gold IRA. There are, however, some exceptions to this rule, such as:

  • When you are unemployed and you want to purchase property for an insurance policy

  • You can prove to the IRS that your life expectancy is less than 70

The worst thing you can do if you own a traditional gold IRA is to reach the age of 70 and then avoid making withdrawals. This will incur a massive penalty of up to 50% of the value of your precious metals IRA.

Getting a Better Return on Investment (ROI)

Gold and other precious metals have a lot of value and a great return on investment. However, there are certain risks involved, just like any other investment vehicle, which is why you should try to make as much money from your gold as possible.

A huge chunk of the money that was supposed to end up in your pocket will go towards paying the various taxes imposed on your precious metals IRA investments. This is especially true if you keep the physical gold yourself, in which case the IRS will consider it as collectibles.

To increase your ROI and avoid paying the maximum collectibles tax rate, you should only hold on to your gold for a year before you invest it in a gold IRA thus ensuring that is listed under capital gains.

Gold is a very stable investment but it does go through its own fluctuations in spot prices that you need to keep an eye on. What you need is a well-thought-out precious metal IRA strategy that will allow you to take advantage of the many benefits and avoid the penalties in the process.

As long s you intend to use your gold IRA as one of your long-term investment options, the periodic fluctuations will not affect your overall ROI and you will enjoy the many benefits of investing in precious metals.

Gold IRA Costs To Consider

Gold IRA Costs To Consider

While a well-managed gold IRA will make more than enough money to cover its own maintenance, it is nonetheless important to discuss some of the common precious metals IRA costs you will come across.

  • Custodian Fees

Various custodians charge different fees in return for managing your account. However, even if you are only planning to work with a reputable precious metals IRA custodian, these fees should be quite manageable.

It is actually the fraudulent companies that charge very high fees. The money you pay will be required to cover some of the administration your account needs as well as the financial advice you will receive. Expect to pay anywhere between $75 and $300.

  • Account Set-up Fees

Setting up your precious metals IRA requires a lot of work in terms of determining how to fund your account from your traditional IRA, contacting your existing custodian, and issuing the various paperwork needed to complete the process.

In return for these services, your gold IRA custodian will likely charge a set-up fee of around $50 to $200.

  • Storage Fees

The catch when it comes to investing in gold and other precious metals is that you are not allowed to keep your own gold coins and bullion. This means you will have to fork out some money to pay for storage at one of the IRS-approved depository facilities.

  • Seller Fees

When you are purchasing gold bullion and other precious metals from a third party, you will likely do so at a higher price than the market value at that time because the seller will want to make a profit. There is also their commitment to consider, which will add to the total amount you have to pay the seller.

  • Insurance

If the insurance for your precious metals is not already included in the custodian fees or storage fees, this is something you need to pay for. These are high-quality metals and as such, the risk of theft is always there. The $100 to $300 that you will likely pay for insurance is nothing compared to the cost of losing all the gold in your IRA.

IRA Approved Gold Coins and Bullion

IRA Approved Gold Coins and Bullion

The IRA tax rules mentioned in this article only apply to certain types of gold, silver, platinum, and palladium coins and bullion. This is because not all precious metals are IRS-approved for use in an IRA.

To be safe, always buy your precious metals from a reputable gold dealer (such as Noble)or at least have the coins looked at by a professional coin grading service provider.

Let us look at the types of gold bars and coins you can purchase for your gold IRA:

IRA-eligible Gold Coins

  • American Eagle and American Eagle Proof coins

  • Chinese Panda coins

  • American Buffalo coins

  • Canadian Arctic Fox

  • British Britannia (2013 and newer)

  • Canadian Maple Leaf coins

  • Australian Kangaroo coins

  • Canadian Polar Bear & Cub

  • Austrian Philharmonic coins

  • Canadian Polar Bear

IRA-eligible Gold Bars

All gold that is intended for use as IRA-eligible gold is required to have a purity of at least 99.5%.

Setting up Your IRA Account

When you are ready to take a step back from mutual funds, and similar paper assets, and purchase precious metals for your retirement savings, you will have to set up a gold IRA account with a legal and licensed IRA custodian.

The following are the steps you will need to take:

IRA Custodian

Find a reputable IRA custodian to handle your gold IRA. There are a lot of scammers out there, which is why you have to be very careful when making your selection before handing over your hard-earned money.

How to choose the right custodian

To choose the right custodian, look at the following:

  • Licensed by the IRS to manage precious metals-based retirement savings accounts

  • A track record of honesty and transparency

  • A physical address that is real in case you need to go there

  • Positive reviews on sites such as the Better Business Bureau and Business Consumer Alliance

  • The one we have endorsed is Goldco’s IRA.

Funding the Account

Next, you will need to fund your account. You can either choose to rollover funds from your 401(k) or other existing traditional IRA, or you can do a direct transfer.

If you choose a rollover, you should remember that you can only do this once a year. The money cannot stay in your account for more than 60 days, otherwise you will receive a 10% penalty.

A direct transfer on the other will come with accompanying transfer fees that you will need to consider. Your IR custodian can look at your accounts and help you determine which method is best.

Storing Physical Gold

Physical gold storage

When you buy gold for your IRA, it belongs to you but you cannot keep it on your own because the IRS will treat this as distributions before the required age, and charge you an early withdrawal penalty.

You will need to use an IRS-approved depository, of which there are many around the country. Your custodian will likely have a preferred depository that they regularly work with which will allow your precious metals to be transported easily.

A lot of investors moan about not being able to keep their own gold and being forced to pay for a storage facility, but it’s not all bad. There are two main advantages to using a depository, which are:

  • Your custodian will handle all the arrangements including transportation to the depository. You can complete the entire process, from rollover to storage of your metals while in the comfort of your own home

  • An IRS-approved depository has to be fully insured against theft and damages. This means if anything happens to your precious metals, either in transit or at the storage site, you will be covered by the insurance company and walk away without making any losses

Key Takeaways

  • How gold IRAs work

  • Not all IRA accounts are eligible to fund a self-directed IRA

  • There are some important tax rules to consider

  • Maximize your ROI

  • Setting up a gold IRA is easy

  • Not all gold is IRS-approved gold coins and bullion

Final Word

If you take the time to learn more about the taxes and penalties associated with owning a gold IRA, you can easily navigate the system and ensure that you get the very best out of this great investment opportunity.

With a such huge opportunity to not only beat inflation but make a sizable profit by the time you retire, there is no reason to further delay diversifying your retirement savings account by investing in gold.

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Tim Schmidt


Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.