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Dunned Inventures is reader supported. When you invest through our links, we may earn a small commission at no extra cost to you<\/span><\/p>\n

To the new investor who wants to expand their portfolio to cover gold, gold IRA tax rules can feel intimidating and confusing. It doesn’t have to, though! We’re going to break down everything you need to know about current 2022 tax laws, including where to invest, which IRA to choose, how to handle capital gains taxes and more.<\/p>\n

Gold & Taxes<\/h2>\n

The Internal Revenue Service (IRS) categorizes gold as any other collectible investment. Much like stamps, coins, rugs, precious metals, antiques, ETFs, and artwork, gold is a collectible asset that holds value.<\/strong> It is usually worth more than its initial sale price.<\/p>\n

Two primary tactics to consider are short-term and long-term strategies when investing in gold.<\/p>\n

A short-term gold investment strategy entails purchasing and then selling within one year. Short-term investors can turn profits more quickly but at the expense of a higher tax rate than those who hold long-term. This tax works precisely the same as ordinary income. Your income tax bracket will determine how much you’ll pay on your capital gains.<\/p>\n

A long-term gold investment strategy means purchasing the gold and holding it for more than one year before selling it. Like other long-term investments, patience is required, but the reward is a more favorable tax rate.<\/p>\n

The long-term capital gains rate here is 28%. This rate is higher than most other long-term capital gains rates, which usually run between 15% to 20%. Gold (and other similar items) are taxed higher because they are considered collectibles.<\/p>\n

Individual Retirement Accounts (IRAs) are one of the best vehicles for minimizing your tax expenses.<\/strong><\/p>\n

Gold IRA Tax Rules<\/h2>\n

A Gold IRA is a specialized IRA that allows users to hold gold in their retirement investments. You can open a gold IRA through a broker-dealer or another custodian. You must hold this account separately from a traditional retirement account, but the contribution limits and taxes are the same.<\/p>\n

You must have an earned income to contribute to Traditional and Roth IRAs.<\/p>\n

As of 2022, people under the age of 50 have a contribution limit of $6,000 per year. Those aged 50 and older have an annual $7,000 contribution limit. This earned income must also be enough to cover what you contribute to your IRA.<\/p>\n

For example, suppose you make $4,000 in earned income in a year. In that case, you are only legally allowed to contribute a maximum of $4,000 for that year to your IRA.<\/p>\n

SEP IRAs follow a different set of rules with varying income limits, which we will cover below.<\/p>\n

Earned income includes salaries, wages, commissions, tips, bonuses, and self-employed income. <\/strong>Rental property income, child support, investment interests, investment dividends, inmate income, retirement income, unemployment benefits, and social security do not count as earned income.<\/p>\n

Traditional IRA<\/h3>\n

This type of IRA means that your contributions will not be taxed; it is a tax deferral.<\/strong> You will not pay taxes on your gold until you begin to use the funds in the IRA. It is best to use this type of IRA if you believe you will earn less money during retirement (putting you in a lower tax bracket) than during your working years.<\/p>\n

Contributions to Traditional IRAs can be partially or fully deductible, too, meaning that you can reduce your income taxes.<\/p>\n

Roth IRA<\/h3>\n

Roth IRAs are taxed differently from Traditional IRAs. You pay taxes on the contributions but do not pay taxes as you use the funds (also known as distributions) in your retirement. You also cannot deduct contributions to this IRA from your income taxes.<\/strong><\/p>\n

If you believe that you will earn more money during retirement than during your working years, a Roth IRA is a better choice than a Traditional IRA.<\/p>\n

For those with higher incomes, the limit is reduced or eliminated.<\/p>\n

You may contribute to your Roth IRA until you are 70 and a half years old, and you can leave amounts in your IRA for as long as you live. For the complete list of details and how to calculate how much you may contribute to your Roth IRA, check out this helpful table from IRS.gov<\/a>.<\/p>\n

SEP IRA<\/h3>\n

A Simplified Employee Pension Plan or SEP-IRA<\/a> lets employers contribute a significant sum of the retirement income for themselves and their employees. This type of IRA has low administrative costs and is available to all businesses, regardless of size. Only the employer can contribute to it.<\/strong><\/p>\n

The employer must contribute an equal amount for all of their eligible employees. What’s so appealing to this type of IRA is that the annual contributions are flexible, so it’s helpful for businesses with variable cash flow.<\/p>\n

Small business owners and self-employed professionals tend to use SEP IRAs the most.<\/p>\n

In-service withdrawals are available but are to be included in income. If the person is 59 and a half years or younger, they are subject to an additional 10% tax.<\/p>\n

Like the Roth IRA, SEP IRA contributions are not taxed. You only pay taxes on your gold investment once you withdraw funds in retirement.<\/strong> Another benefit of this type of IRA is that contributions are tax-deductible, so your income taxes can be reduced while investing.<\/p>\n

Employers (or self-employed business owners) can contribute up to 25% of their total annual income, or $58,000 annually, whichever is lower.<\/p>\n

Optimize Your Gold IRA For Taxes<\/span><\/p>\n

Bequests<\/h3>\n

A bequest allows a person to gift money or IRA to others in the event of their passing, usually through a trust or will.<\/p>\n

After death, most IRA accounts, excluding Traditional IRAs, are fully taxed within ten years. Inherited Roth IRAs work a bit differently. The money can continue to grow in the account for an additional ten years, and then the funds may be withdrawn tax-free to heirs. Some states do tax inherited IRAs, too, so look into that and consider your options carefully.<\/p>\n

If you choose a beneficiary that is a tax-exempt charity, the money donated to them will not be taxed no matter what.<\/p>\n

This bequest avoids taxes of up to $100,000. <\/strong>Accounts that exceed this amount are susceptible to some taxation. This tax rate depends on your heir’s income tax bracket.<\/p>\n

Is A Gold IRA Tax Deductible?<\/h2>\n

In short, yes, Gold IRAs are tax-deductible, but only if you have a Traditional or SEP IRA. <\/strong>If you have a Traditional Gold IRA or a SEP Gold IRA, you do not pay taxes until withdrawal. These accounts are tax-deferred. Gold Roth IRAs are not tax-deductible, your money will be taxed upon contribution, but withdrawals are tax-free.<\/p>\n

How Do You Avoid Capital Gains Tax On Gold?<\/h2>\n

\"How<\/span><\/p>\n

There aren’t any special rules for gold for capital gains, so you’ll need to minimize your tax bill through your overall tax planning.<\/p>\n

Use a Self Directed IRA (SDIRA)<\/strong><\/h3>\n

Traditional, Roth, and SEP IRA accounts, all mentioned above, are classified as SDIRAs. This method allows you to sell with zero capital gains tax<\/strong> because IRA accounts protect assets from taxation, even during growth.<\/p>\n

There isn’t a legal penalty for using your account to sell the gold for these accounts. There are a few rules you need to follow, though, so use caution and follow these closely:<\/p>\n