Investing in Gold and other precious metals through an IRA is profitable and involves less risk. However, it is necessary to have a custodian who takes the responsibility of storing the assets invested. Although a person invests in precious metals, they do not have to store them physically. As per the IRS rules, the IRA purchased precious metals can only be held by IRS-approved banks and trustees. Still, many users have doubts about whether they can do a home storage gold IRA, rather than having a custodian.
This would help them save on the annual fee given to the custodian and can physically have the precious metal as well. Although this seems to be a tempting offer, there is a lot behind it that people do not know about. There have been ads and claims by many dealers who are offering the home storage gold IRA option with free safety as well. Such investors have also been searching for things like “how to set up a home storage gold IRA?” This article will give you complete details about home storage gold IRA and whether it is the right choice.
Rules and Policies on Home Storage Gold IRA
It is possible for investors to purchase and hold gold physically in their homes. However, the IRS does not allow and prohibits this with IRA-purchased precious metals. As per Section 408(m) in the IRS code, it has been stated that only particular precious metals can be purchased with an IRA. It also states that the precious metals should be in the physical possession of a trustee. As per the rules, Gold bars, billions, are collectible under the IRA statutes. The law discourages investors from holding it physically. They can invest in highly refined bullion which is in physical possession of a bank or IRS-approved trustee. So overall, a home storage gold IRA is not allowed and prohibited when you are purchasing gold and other precious metals through an IRA.
Are There Penalties For Home Storage of a Gold IRA?
Before we mention the penalties and consequences of doing it even when it is prohibited, we should analyze the risks associated with it. Handling and storing physical gold and other precious metals could be very risky. There is always a chance of theft in such cases, which could lead to all your investments going to zero. When it comes to the IRS rules, there is a consequence if you do not comply with them. As per the policies, the individual who goes for a home storage gold IRA can face a lot of taxes, penalties, and fees on the entire IRA. Also, the IRS can decide to call the individual on their self-storage of precious metals.
Since it is considered to be a violation, these investors may be subject to a penalty. Investors who choose to store physical gold in their home as part gold IRA will trigger a distribution which will attract a 10% penalty. Penalties occur when individuals are under the age of 59.5 years old. Also, the investment in gold will not be tax-deferred, due to which you will owe tax over the distribution. It could also lead to an IRA audit, where they will check for any improper account activity. If found, you will have to pay additional penalties and fines.
Fraudulent Ads on Home Storage Gold IRA
Many dealers have also started advertising themselves as trustees which are helping people in home storage gold IRA. They show dozens of gold bars stored in a safe at home. Also, they are offering free safes to the person who hires them. Almost every one of these ads is misleading and fraudulent. Until recently, your home storage of a gold IRA can not be done through an IRA account as it is prohibited. Still, if any dealer or so-called trustee encourages you and ensures that it is safe, then they are misleading you. Remember, only IRA-approved trustees and banks are allowed to hold the precious metals that you invest with an IRA account. Therefore, you need to be alert about these types of ads and promotions.
When it comes to the term home storage, there is a lot of confusion among IRA account holders. An IRA account does allow the investors to technically set up an LLC and control the IRA purchases. However, the investor is still not allowed to store the gold physically with them in a safe. In that case, it will be counted as a collectible and not as an investment under IRA. It has to be stored in a secure depository location under the LLC name, like a safety box in a bank. Storing the gold or other precious metal in a safe or at your home will qualify as a distribution and will lead to penalties.
The Proper Way of Investing in Precious Metals Through an IRA
Gold IRAs are completely self-directed and can be used to purchase gold bullion and other precious metals. The account can also be used to invest in real estate, crypto, and much more. An investor simply needs to work with an IRS-approved custodian, which is usually a financial institution. They will handle all the transactions, and disbursement, and will hold the entire records of the account. You can simply transfer the funds into the IRA account with a maximum contribution of $7,000 years. You can use the same funds to buy gold bullion and other precious metals. The same value of precious metals will be stored in approved depository locations after purchase.
If you are investing through a Gold IRA account then, a home storage gold IRA is not the thing for you. It should only be done through the IRS-approved custodian to avoid any penalties and fines. Also, it ensures better security of the purchased precious metals. Avoid getting into the trap of ads and commercials which claim to provide a free safe and home store of gold bars as they are not approved by the IRS.