Precious Metals in IRAs: What’s Allowed
As concerns about inflation and market volatility continue to shape investor behavior, many individuals are looking beyond traditional equities and bonds in search of diversification. Precious metals—especially gold, silver, and platinum—have seen increased attention as a perceived safe haven. Over the past year, their value has risen significantly, rewarding those who shifted early. But whether you’re already investing in precious metals or simply exploring the idea, it’s important to understand the tax rules that govern how these assets are treated, particularly in retirement accounts and taxable brokerage portfolios.
At first glance, it may seem that IRAs can’t hold physical precious metals. Generally, investments in metals or coins are considered acquisitions of collectibles under the tax code, and therefore treated as taxable distributions when made through an IRA. However, there are exceptions that allow IRAs to hold certain types of metals without triggering a taxable event, provided specific requirements are met. Permitted IRA investments include:
- Coins such as:
- American Gold Eagle
- Canadian Gold Maple Leaf
- American Silver Eagle
- American Platinum Eagle
- Bullion meeting purity standards, such as:
- Gold that is at least 99.5% pure
- Silver that is at least 99.9% pure
- Platinum and palladium that meet similar thresholds
These assets must be held by a qualified IRA trustee or custodian, not by the account owner directly. This applies across all IRA types, including traditional IRAs, Roth IRAs, SEP-IRAs, and SIMPLE IRAs.
Setting up a self-directed IRA that holds physical metals often requires working with a specialized trustee and involves additional costs. These may include:
- One-time account setup fees
- Annual administration and storage fees
- Transaction-based charges for buying, selling, or transferring assets
Costs can be flat or based on the value of the assets stored. Investors considering this path should be prepared for some administrative complexity.
Indirect Exposure Through ETFs and Stocks For those who want to avoid the logistics of buying and storing physical bullion, IRAs can gain exposure to precious metals through indirect investments.
One option is precious metal exchange-traded funds (ETFs), which track the value of metals such as gold or silver. Under current tax law, these ETFs—if properly structured—are considered investments in grantor trusts, not collectibles. That distinction allows them to be held in IRAs without being treated as taxable distributions. However, not all ETFs meet the required standards, so it’s essential to consult the tax disclosures in the fund’s prospectus before purchasing.
Another approach is to invest in common stock of mining companies. These publicly traded companies offer exposure to the price movements of precious metals through their operations. Stocks of mining firms are not restricted in IRAs and are treated as standard equity investments for tax purposes.
Special Considerations for Older Investors Volatility is a key factor to consider, especially for investors nearing retirement. Physical precious metals may lack the liquidity necessary to meet Required Minimum Distributions (RMDs) once a traditional IRA owner reaches the age of 73. For example, someone might own two IRAs: one invested in physical gold bullion, and the other in liquid mutual funds. The annual RMD doesn’t have to come proportionally from each IRA. Instead, the full RMD amount could be taken from the liquid account, allowing the bullion to remain untouched. This strategy can be effective, but it assumes that the investor has alternative sources of liquidity and that the value of the bullion can be reliably tracked for RMD calculations.
Tax Implications in Taxable Accounts When precious metals are held outside of retirement accounts, the tax picture changes significantly. Long-term capital gains on physical precious metals and many metal-backed ETFs are taxed at a maximum federal rate of 28%, not the standard 20% rate applied to most long-term capital gains.
Here’s how it breaks down:
- Precious metal ETFs in taxable accounts:
- Long-term gains taxed up to 28% (collectibles treatment)
- Short-term gains taxed as ordinary income (up to 37%)
- Both may be subject to the 3.8% Net Investment Income Tax (NIIT) and applicable state taxes
- Mining company stocks in taxable accounts:
- Long-term gains taxed at standard 20% rate
- Short-term gains taxed as ordinary income
- NIIT and state taxes may also apply
Understanding how these assets are treated helps investors make more informed decisions about where and how to hold them. Weighing the Risk and Reward Of course, it’s entirely legal to hold precious metals personally, outside of any retirement or investment account. But when investors choose to include them in a broader portfolio—whether in an IRA or brokerage account—it’s essential to understand the tax implications, administrative requirements, and potential liquidity constraints.
If you’re considering precious metals as part of your investment or retirement strategy, understanding the tax consequences is critical. Reynolds + Rowella’s experienced tax advisors can help you navigate the rules, avoid costly missteps, and make informed decisions that align with your financial goals. Contact us today to schedule a consultation and take the guesswork out of precious metal investing.
Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve. Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.
