There are two methods used by the IRS to apply taxes to gold placed in an IRA as an investment. An investor should learn the gold IRA Rules to receive the desired benefit from investing in a gold IRA. The two options available for tax purposes affect the method of withdrawal used for taking the gold out of the IRA.
The first withdrawal option available is to liquidate the gold before withdrawing it from the IRA. Normal IRA tax rules apply when this option is chosen; taxes are paid on the withdrawal. The second choice is to take physical possession of the gold in its metal form and liquidate it at a future time.
Choosing this procedure requires an investor to pay income taxes on the value of the metal at the time of the withdrawal. At the chosen time of the liquidation, a 28 percent capital gains tax is required by the IRS. The benefit offered by a gold IRA is the choice of when the income taxes are due on the withdrawal.
If tax rates remain low the most beneficial option appears to be in liquidating and paying the income tax. An increase in the value of gold in the future could make the most advantageous choice become holding the metal in its physical form for future appreciation. The disadvantage is the possibility of double taxation. The taxation levied when the money is withdrawn and the 2nd taxation on the capital investment.
An investor must choose wisely when considering a gold IRA. Specific rules apply for the investment to be qualified. Among these rules are that only US gold coins along with other bullion coins are allowed as an investment. Coins carrying a numismatic premium are not allowed. Another investment error to avoid with a gold IRA investment is purchasing the more expensive Proof versions of bullion coins as the gold investment rather than the standard Mint State.
The method of manufacturing the Proof versions cause these coins to demand a premium price in the market. In essence the investor is actually getting less gold “value” for the dollar. A self directed IRA account is required to purchase these coins as an investment. These accounts are allowed to contain a variety of different assets.
Once the coins are purchased, they must be stored in a depository. These locations are insured, secure approved for protecting valuable assets. Each investors’ assets are held in a segregated compartment so that each investor receives the actual coins deposited upon the withdrawal.
More Information On Gold IRA
As you can see there are quite a few rules in Gold IRA and it can be quite confusing. Fortunately, there are sites like IRA Investing that can help you through the process. They have a list of all the rules and regulations that you need to know about Gold IRA along with step-by-step instructions on how to set one up. The information they provide is invaluable, especially if you are new to this kind of investment.