Luckily, you can offset these increased capital gains taxes by buying gold ETFs in a Roth IRA.. Because you’re depositing money into a Roth IRA after tax, you don’t have to pay taxes every time you withdraw in retirement. Specialized custodian banks such as Fidelity, Schwab or TD Ameritrade do not manage physical gold in an IRA.. So if you want to keep gold in your IRA, you’ll need to set up a self-directed IRA first and then you’ll need to find a custodian that specializes in self-directed gold IRAs..
A quick search on Google for “self-directed Gold IRA” yields numerous results.. I know that American Bullion has been around for years and so has APMEX. After doing this research, you’ll likely come to the conclusion that the gold or gold bars and coins shouldn’t belong in your IRA. If you want to benefit from a rise in the price of gold, it is more efficient to own an Exchange Traded Fund (ETF).
The ETF can be bought and sold anytime the markets are open. The ETF is also able to buy, store, and insure gold at a much lower price than you or an IRA custodian. The IRS has issued private letter rulings to the major gold ETFs, which state that IRAs may own the ETFs. For details, see the “Tax Risks” section of the prospectus for one of the ETFs..
While IRAs are generally prohibited from owning collectibles, they can own certain gold, silver, and platinum coins from the USA, as well as gold, silver, platinum, and palladium bars.. IRA owners who want to have a position in precious metals can do so by investing in investment trusts and being classified as grantor investment trusts.. The IRS has privately ruled that IRA owners will only be treated as if they would receive a taxable distribution if shares in ETFs that hold the commodities are distributed to them.. If you’re still concerned about your IRA being allowed to hold an ETF, check out the tax section of the fund prospectus, which is usually available online.
You probably also know that gold is a “collectible” and that IRAs are not allowed to own collectibles.. This column covers the details of using IRAs for direct investments in actual precious metal coins and bars, as well as indirect investments in the form of precious metal ETFs (Exchange Traded Funds) and mining stocks, as well as the effects of federal income tax.. Presumably, a reputable brokerage firm that acts as an IRA trustee will not allow an IRA to buy shares in an unapproved ETF in the first place. Most Roth IRAs do not allow you to buy gold directly, but you can invest in gold indirectly to benefit from gold price trends or wider industry trends..
If gold and precious metals are an asset class that you want to include in an IRA, there are easier ways to do that than holding the physical metal. In other words, when you buy gold in your Roth IRA, you can’t keep the physical bars or coins yourself. However, investing in gold ETFs doesn’t necessarily offer the same benefits as buying gold directly, Frederick said.. If you’re in doubt as to whether IRAs are allowed to own a particular precious metals ETF, check out the tax section of the fund prospectus, which should be available online..
Luckily, the IRS had stated that IRAs could buy shares in precious metals ETFs classified as grantor investment trusts without such problems.. Another benefit of owning gold, which is considered a “safe haven,” is that gold can act as a hedge against the economic downturn when stock markets are falling.. If you really think it’s a good idea, at least check out the IRS rules and custodian fees before you deposit gold into your IRA.. If you sell your shares in an ETF at a profit and have held those stocks for more than 1 year, capital gains tax rates are normally 0, 15, or 20%, depending on your taxable income and filing status.
Some of these funds also invest in the various companies in the gold industry, while others invest in gold futures contracts. While the custodian can help you, it is your responsibility to ensure that any coins or gold bars purchased for the IRA meet IRS requirements..