Can You Buy and Sell Gold Tax-Free?

Self-directed retirement accounts can help reduce taxes, but know the rules.

gold image by Witold Krasowski from

The IRS comes looking for its cut no matter what you buy and sell. The only difference is whether it taxes your profits as capital gains or as income. If you are buying and selling gold as an investment, you must normally pay long- or short-term capital gains taxes, depending on whether you owned the gold longer than a year. If you are a retail buyer and seller, you fall under dealer rules, and you will normally be taxed as income. If you are buying and selling collectibles as a hobby, you will be taxed at the collectibles rate of 28 percent. However, there is one circumstance that allows Americans to buy and sell an unlimited amount of gold without a tax consequence: The self-directed Roth retirement account.

Self-Directed Retirement Accounts

Most of us associate IRAs and 401k plans with stocks, bonds, annuities and mutual funds. But there's no law against taking your retirement accounts and buying gold. As long as you don't buy and sell from relatives or entities you own, the gold you buy and sell comes in certain forms and you don't take physical possession of the gold, you can hold it in a self-directed IRA, SIMPLE, 401k or SEP IRA account.

Roth Accounts

Roth IRA, Roth 401k, Roth SIMPLEs and ROTH SEP contributions are made with after-tax dollars, so the IRS allows assets within your Roth account to grow tax-free. There are no required minimum distributions, no income taxes and no capital gains taxes on assets you sell from your Roth account for the rest of your life, although estate taxes may still apply on Roth assets when you die.

Opening a Self-Directed Roth Account

Find a plan administrator who handles self-directed accounts, and open a Roth IRA account with him by sending in a check to fund the account. You can do this with new contributions, or you can rollover an existing retirement account to the new self-directed account -- expect to pay income taxes when rolling a tax-deferred retirement account to a Roth. Next, direct the administrator what gold you want your Roth account to hold on your behalf, whom to buy it from and at what price. The administrator will handle the transaction and accounting for you. If you are buying and selling physical gold, a third-party custodian will have to hold it for you.

Prohibited Transactions

Self-directed rules are complex. You cannot direct your self-directed account to buy, sell or lend money to yourself, your spouse, your ascendants, descendants, their spouses or any entities they control. If you do so, the IRS may disallow the entire self-directed retirement account, and charge you taxes and penalties. Also, gold held in an IRA must meet certain standards of purity or quality control to be eligible. American Eagle gold coins and bullion are acceptable; South African Krugerrands are not. Determine the eligibility of gold assets for holding in IRA accounts prior to obtaining the assets.