Gold IRA Rules and Regulations

There is a lot of confusion on the rules that surround Gold IRAs. Some investors think they can simply walk into a coin shop and buy the gold with money from their IRA account. Others are uncertain if they can keep their metals at home in their closet, under their mattress, or in a safe behind a false wall. There are ideas floating around that any type of IRA administrator can simply open up a Gold IRA account on your behalf. The truth is that there are actually quite strict rules and regulations brought to you by the IRS which govern how these types of accounts work and have to be maintained in order to take advantage of their tax-deferred benefits.

Home Storage Gold IRA Regulations

One of the greatest areas of misinterpretation of IRS rules is that you can keep your gold at home and still have it be included in your IRA. This is called a Home Storage Gold IRA. The strict interpretation of the rules says there must be a third party custodian and an approved Gold IRA administrator. There are a number of companies in business today who are promoting the idea that you can simply sidestep these regulations by becoming your own IRA administrator and using either a home safe as the storage or having a third party bank act as vault storage. While some of these ideas are novel and excite many investors, the truth is that this grey area will only persist for a certain amount of time before the IRS comes down with a firm ruling that will most likely back up the traditional interpretation of the regulations.

Custodial Maintenance Regulations

This brings you to the hard and fast rules on custodial maintenance that ensure you will not run afoul of any IRS penalties with your Gold IRA. As the majority of IRA administrators and custodians will tell you, Gold IRAs can not simply be held in the privacy of your home. The way that these accounts actually work is that you have to choose and direct a particular custodian to be able to oversee, store, and maintain your gold bars and coins. The rules are strict enough that you can not simply go out and purchase your own yellow metals and then transfer it over to your IRA custodian after the fact. If you were to physically hold your own IRA gold coins or bars even for a single day it would make them invalid to be included in your IRA account. Instead, precious metals that you have had bought in this manner with IRA account funds would be treated as though you had taken a distribution out of your IRA. This is something you want to avoid at all costs, unless you are intending to take a distribution deliberately.

The proper and correct way to maintain such an IRA account is to give instructions to your IRA administrator. They will buy the gold for you and then transfer it to an insured depository which is typically a third party company. There are some cases where the administrator can also be an IRS-approved depository directly. This all means that your involvement with the gold is only to give instructions to your administrator so that the company will make arrangements to purchase the precise gold coins and bars that you direct. They can advise you with regards to the particular pieces they recommend, if this is your first experience with gold and you feel like you need help.

Depositories themselves have certain procedures and rules. They must be approved companies and storage vaults that the IRS sanctions. It is expected that they will assess a yearly storage fee that is deducted from the IRA account value. They will then keep your gold in a secure and insured location until you give orders for it to be sold or distributed out to you either as an in-kind gold distribution or as cash.

Types of Permissible Precious Metals Regulations

It is important to realize that you can not simply take your pick of any gold coin or bar that strikes your fancy when you are selecting metals for your Gold IRA account. Any coin that is considered to be collectible will not be allowed. Certified and graded bullion coins are also not permitted in these accounts. Gold coins that the IRA accounts are allowed to hold include those which are at least 24 Karat gold or American Eagle gold coins which come in at 22 Karats. They must also be from foreign mints that the IRS approves. Coin sizes are allowed to be one-tenth, one-quarter, one-half, or whole ounce coins.

 Gold IRA Rollover Regulations

If you decide to fund your new Gold IRA account using a rollover, this has to be done in a certain way. Your IRA balances that you rollover will often be sent to your home address by check. Once this occurs, you need to be certain to get the money transferred back over to the new IRA account administrator in a rapid fashion. You only have 60 days to complete this transfer. If you take longer than this allowable time frame, the IRS will count these transfers made to you as a distribution instead. This means that the IRA withdrawal would then be subject to taxes and penalties. You are also only able to do a physical rollover like this one time per year. Funds that you simply transfer from a traditional IRA to an already existing Gold IRA are not restricted this way.

Gold IRA Distribution and Contribution Regulations

Where distributions are concerned, most of the same rules apply as with traditional IRAs. You may choose to sell your gold and withdraw it, but of course the usual IRS taxes and early withdrawal penalties will apply. Taxes that were deferred would then become due. Another choice that you have with these types of IRAs is to request that the custodian send you your tangible gold to your home. In this case, the income taxes are determined based  on the gold’s value when you withdraw it. Any gains that you make on the sale of this gold in the future will be subject to 28% in capital gains taxes as well.

Contribution rules for these types of IRAs are identical to the traditional types of IRAs. There is a limit to the dollar amount that you are allowed to contribute each year. For years 2016 and 2015, the limit is $5,500 for contributions to Self-Directed IRAs like the Gold IRA as well as to traditional IRAs. There is good news if you are more than 49 years old. The annual contribution limit rises to $6,500 in an effort to help people catch up in case they are behind with their retirement savings. There is no point in trying to exceed your contribution limit to these IRA accounts, as the IRS penalizes them by taxing them at 6% annually until the excess amounts are taken out of the account.