Thanks to a Tax Code exception, IRAs can hold certain coins and ingots of precious metals, such as American Gold Eagle coins, Canadian gold maple leaf coins, American silver eagle coins, American platinum eagle coins, and gold, silver, platinum and palladium ingots that meet applicable purity standards. With current stock valuations and historically low interest rates on fixed income investments, some IRA owners may be interested in investing in precious metals. However, before doing so, it is important to consider the federal income tax implications.The tax code prohibits IRA holders from investing in life insurance, shares of an S corporation, or collectibles. Some types of gold coins are classified as collectibles and would violate the rules.
It is not always clear which gold coins and types of ingots are allowed and which are not. An IRA that holds an ingot ETF, such as SPDR Gold Shares (GLD), is considered to hold a stock. However, in a taxable account, when a stock of an ingot ETF is sold, it is treated as the sale of a stock of ingots owned by the ETF.At first glance, the Internal Revenue Code seems to cast cold water on the idea of holding physical precious metal assets in an IRA. When investing only in publicly traded stocks, bonds and mutual funds, there are no special issues.
However, tax law prohibits or penalizes other IRA investments. These difficulties are becoming increasingly important as investors become more attracted to “hard assets” and other non-traditional investments.When it comes to gold investments from an IRA, you won't have to pay the 28% taxable tax rate. You will be subject to the marginal tax rate. This also means that you'll pay more than 28% in taxes if you're in a high-income tax bracket.
The annualized after-tax return on gold coins is the lowest, approximately one percentage point lower than that of the gold investment fund, which receives the LTCG treatment. Profit margins on gold bars are generally lower than on gold coins in a specific country, but both are collectible for tax purposes.Goldco specializes in helping investors invest in gold in the most fiscally efficient way with 401Ks, IRAs and regular purchases of gold and silver. This is a severe fiscal blow to most gold investors and for years investors looked for alternative vehicles to invest in gold in order to lower tax bills and improve the return on their investments after taxes.The main advantage of IRAs is that investments made in the IRA are taxable at the time of withdrawal by the investor. Alternatively, a physical gold CEF is a direct investment in gold but it has the advantage of taxing LTCG rates.
I think the idea behind storing gold or silver in a Roth IRA is to create a tax haven against such an atrocious government measure.While secondary investments in gold such as gold mining stocks, mutual funds, ETFs or ETNs may yield fewer pre-tax returns; after-tax returns may be more attractive. Investors in a Roth IRA pay income tax in advance with a purchase but all future growth is tax-free; investors with a pre-tax IRA pay their regular tax rates when they withdraw money in retirement.
