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If you have been thinking about investing in gold and other precious metals like silver, platinum, and palladium, then you have probably heard advertisements for so-called "home storage" gold IRAs. These IRAs allow you to store gold in your own house.
Before engaging in conversation with these sellers, it is essential to exercise extreme care, even though their assurances could seem enticing. These accounts, in many instances, contravene the regulations set forth by the IRS and may be breaking the law.
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Home Storage Requirements for a Gold IRA
The following is a list of characteristics that you must satisfy to be eligible for a home storage Gold IRA. If it is discovered that you do not comply with these requirements, the purchase will be considered a taxable withdrawal from your retirement account.
As a minimum, precious metals home storage Gold IRA will require:
You are required to already have or establish a limited liability corporation in your name, complete with an operating agreement that has been specifically created.
Following completion of the incorporation process and all audits, you are required to have a minimum of $250,000 in net worth.
As a kind of business insurance, the corporation requires that each of its workers as well as its trustees post a fidelity bond for $250,000.
Several individuals must own ownership stakes in the trustee corporation.
The applicant is required to demonstrate that they have prior expertise managing retirement funds, in addition to having verifiable experience in the role of a fiduciary and a "reputable financial background."
The trustee organization that manages your retirement account (IRA) needs to operate out of a building that is accessible to the general public.
The applicant is required to have corporate legal counsel on retainer and to produce a complete audit that has been performed yearly by a competent public accountant.
Before you can begin purchasing any precious metals, you need to fulfill all of those conditions first. This means that in addition to the required amount of time and paperwork, you will also be required to pay significant administrative charges to form a retirement account of this kind.
However, this is only the tip of the proverbial iceberg. There are a few extra requirements that you need to fulfill, and the Internal Revenue Service frequently pays additional attention to Home Storage IRAs in the search for potential infractions.
The Internal Revenue Service can make it simpler to create a home storage IRA. But it didn't, since it made sure that all IRAs were managed by people who were competent to do so.
Even a self-directed individual retirement account (IRA) in your own home is simply a circuitous means of investing in your limited liability company rather than the gold itself. There is still the requirement that a custodian is listed.
What does the Internal Revenue Service have to say about IRAs for Gold Kept at Home?
Although it is possible for investors to buy real gold and store it in a safe at home, the Internal Revenue Service expressly bans individuals from doing so with IRA-purchased gold (and other precious metals).
The sorts of precious metals that can be acquired using funds from a self-directed individual retirement account are outlined in Section 408(m) of the Internal Revenue Code. In addition, the statute stipulates that these things have to be "in the physical custody of a trustee."
Even greater clarification on the topic may be found on the IRS's Frequently Asked Questions website, which can be found here.
It says that "Gold and other bullion are "collectibles" under the IRA statutes, and the legislation discourages the keeping of collectibles in IRAs. The law also refers to gold and other metal as "collectibles."
There is a provision that makes an exception for some highly refined gold as long as it is in the actual ownership of a bank or a nonbank trustee that has been approved by the IRS.
A white paper published in 2018 by the Industry Council for Tangible Assets, which serves as a watchdog for the industry, provides more evidence that storing gold at home is not permitted when utilizing an IRA to acquire gold.
What's the title? "The Ban on Personal Storage of Bullion Within an Individual Retirement Account"
If an Individual Retirement Account for Gold is Opened at Home Wrongly, are there any Taxes or Penalties that Must Be Paid?
Investors who flout the regulations and keep the gold they bought with their IRAs in their homes might be subject to distribution fines.
If you are under the age of 59.5 and keep your gold at home, this will be considered a distribution, and you will be subject to a 10 percent penalty.
Because the investments will no longer qualify for tax deferral, you will be responsible for paying income taxes on the proceeds of the distribution. In most instances, we're talking about a large sum of cash.
This action may also result in an audit of the IRA being conducted. If the IRS discovers that you have been engaging in inappropriate account activity, you may find that you are subject to an audit.
Depending on the findings of an audit, extra fines and penalties could be imposed if one is conducted.
It is Not a Good Idea to Keep the Gold in Your House.
The Internal Revenue Service makes it quite plain that it does not want anybody to store gold from a Self-Directed Individual Retirement Account at their house or in their safe deposit box. This is one of the most essential rules of gold IRAs.
If you try to store gold that is meant to be stored in a Self-Directed IRA at home, the Internal Revenue Service would most likely see it as a distribution from the IRA, which means that it will be subject to taxation.
In addition, according to the Industrial Council for Tangible Assets, holding IRA assets in your own house might be seen as "self-dealing," which would result in the IRS seeing the transaction as a banned business activity.
The distribution of any assets from an individual retirement account (IRA) is considered a banned activity.
This includes gold that is being stored at home. In a nutshell, the wisest course of action is to steer clear of whatever is labeled as "prohibited." You should not take any unnecessary risks with your retirement savings.
Remember that you may still do so even if you wish to retain real gold at home, as long as the gold is not part of an individual retirement account (IRA). You are free to purchase as many gold coins and gold bars as you like and keep them in your own home safe deposit box.
As a citizen of the United States, you are entitled to it. You should keep your actual gold until you are ready to retire or pass it on to future generations; but you should not pretend that any of it is a component of an individual retirement account (IRA).
One Breach in Security Might Determine the Fate of Your Retirement Savings
Before you dive into home storage, there is one more catching point to consider, and that is security. Even if you can successfully meet all of the requirements and feel comfortable managing the administration of your account, there is still one more catching point to consider.
How secure would your metals be in a home safe or a neighborhood safety deposit box when compared to the level of protection provided by a bank that has state-of-the-art security systems?
Although it's possible that a thief won't be able to break into your home safe or safety deposit box very easily, the fact remains that the relative security of these storage locations isn't even close to what you'd get if you registered your metals with an authorized custodian and had them stored through a depository.
You will still have access to your gold and silver when they are kept in depositories that keep them on your behalf. However, you will have the added security of knowing that they are kept in a facility of the highest caliber, ensuring that they will never be stolen.
In addition, the metals do not enter the balance sheet of the depository at any point, which means that they are protected from any interference from governmental bodies as well as any potential dangers that may befall the depository itself.
Why is There Such a Great Deal of Uncertainty Regarding Gold IRAs for at Home Storage?
The advertisements for IRAs that provide "home storage" have led to a great deal of misunderstanding concerning gold IRAs.
You are not allowed to keep gold at your home, even though it is technically possible for you to establish a limited liability company and exercise full control over the investments made with your retirement account (as long as you satisfy certain severe conditions).
It has to be kept at a safe depository place in the name of the limited liability company, such as a safety deposit box, for instance.
Putting the gold in a safe or hiding it beneath the mattress at home would be considered a distribution according to the strict definition of the term.
If you take withdrawals from your retirement account and are less than 59.5 years old, this is considered an early withdrawal, and you will be subject to a 10% penalty.
How Exactly does a Gold IRA Account get Funded?
Gold IRAs are also known as self-directed IRAs; however, you are only allowed to use them to buy precious metals and gold bullion that has been approved by the IRS. They can also be put toward the acquisition of enterprises, properties, and other types of assets.
You will need to engage with a custodian that is approved by the IRS to create one of these accounts, which is often a bank or another financial institution. They will take care of the distributions, maintain the records for the account, and file the necessary IRS reports on it.
After the account has been created, you have the option of funding it through a rollover or transfer from an existing retirement account, or you can contribute money using a check or an electronic wire transfer.
If you are at least 50 years old, you are eligible to contribute up to a total of $7,000 each year.
After you have contributed money to your IRA, you will have the ability to give instructions to the custodian regarding the gold bullion that should be purchased (and how much).
Once the gold has been acquired, it will be required to be kept in a depository that has been pre-approved.
For some reason there is a lot of interest in Home Storage Gold IRAs. At Exim Bank India we definitely do not recommend anyone to attempt one of these. You will likely fail and run into serious tax penalties.
Basically, do not fall for any gold scams that recommend you buy gold for a home storage IRA. There are much better ways to invest in physical gold in a tax efficient manner.
It's a great idea to hold physical gold and other precious metals in an IRA, but we recommend you do it the right way by partnering with a trusted precious metals company that specializes in these unique accounts.
You can get a Free Gold Investors Guide from our top gold and precious metals company recommendation by clicking the link above or you can read our article of the top companies we reviewed this year: