What Is a Precious Metals IRA? A California Guide

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Last updated: July 2, 2026 · By Gold California Editorial

This page defines what a precious metals IRA actually is, and it does so with the California saver in mind. Every rule cited below traces to an IRS publication, the Internal Revenue Code, or the California Franchise Tax Board. The California angle sits where it matters, mostly in the tax section, because the account itself is a federal construct that behaves the same in every state.

What a precious metals IRA is, in plain English

A precious metals IRA is a self-directed individual retirement account that holds physical gold, silver, platinum, or palladium instead of stocks, bonds, or mutual funds. It is not a separate legal category in the tax code. It is a regular IRA under Internal Revenue Code Section 408, operated so that the assets inside it are IRS-approved metal held by an approved trustee (source: 26 U.S.C. Section 408, Cornell LII).

The tax rules match a normal IRA in almost every way. Traditional pre-tax contributions grow tax-deferred, and each qualified distribution is taxed as ordinary income at the time of withdrawal. A Roth version is funded with after-tax money, and a qualified distribution comes out tax-free. What changes is the asset class inside the account, not the account's tax character.

People also call it a gold IRA, a silver IRA, or a self-directed metals IRA. All of those labels point to the same structure. The account may hold one metal or a mix, in coins, bars, or both, as long as each item satisfies the special rule under IRC Section 408(m)(3).

A California resident opens and operates one exactly the way any other American does. The federal rules do not change at the state line. What California adds is a state tax layer on distributions and a special 2.5% additional tax on early withdrawals under Franchise Tax Board Form 3805P (source: California FTB, Early distributions).

Which metals qualify and which do not

Not every coin or bar qualifies. IRC Section 408(m) lists collectibles that an IRA generally cannot hold, and then carves out specific precious metals from that ban (source: 26 U.S.C. Section 408(m), Cornell LII). The IRS Issue Snapshot on collectibles in individually directed plan accounts summarizes the carve-outs the same way (source: IRS, Investments in Collectibles).

Two categories are allowed. The first is certain gold, silver, or platinum coins described in 31 U.S.C. Section 5112, plus coins issued under the laws of any state. The second is gold, silver, platinum, or palladium bullion of a fineness at or above the minimum accepted by a commodity contract market, held in the physical possession of an approved trustee.

The statute defines the fineness threshold by reference to commodity market delivery standards, not by literal numbers in the tax code. The industry minimums recognized by the IRS are gold .995, silver .999, platinum .9995, and palladium .9995. Cite them as the practical standard, not as verbatim statutory numbers.

The American Gold Eagle sits in the coin carve-out, so it qualifies even though its fineness is .9167. Numismatic and graded rare coins outside the 31 U.S.C. Section 5112 list do not qualify. Buying one inside an IRA is treated as a deemed distribution equal to cost, taxed as ordinary income, plus the 10% federal additional tax if the owner is under 59.5 (source: IRS Issue Snapshot cited above).

Sources: 26 U.S.C. Section 408(m)(3); IRS Issue Snapshot on collectibles in individually directed plan accounts. Fineness figures are the industry minimums the IRS recognizes by reference to commodity market delivery standards. Checked June 2026.

Who holds the metal: custodian and depository

A precious metals IRA has two structural roles the account owner cannot fill. One is the custodian, an IRS-approved trustee or non-bank trustee that owns the metal on behalf of the IRA. The other is the depository, the approved vault that physically stores it. Both are non-optional and both are set by statute.

The requirement lives inside IRC Section 408(m)(3)(B), which says the qualifying bullion must be in the physical possession of a trustee described under Section 408(a). Section 408(a) sets out the trustee rules for IRAs generally. The practical result is that an approved depository holds the coins or bars in a segregated or commingled account under the custodian's name (source: 26 U.S.C. Section 408(a) and 408(m)(3)(B), Cornell LII).

Home storage of IRA metal is not allowed. The IRS treats it as taking personal possession of an asset the IRA owned, which is a deemed distribution of the metal at its cost. If the owner is under 59.5, the 10% federal and 2.5% California additional taxes apply on top of ordinary income tax (source: IRS Issue Snapshot cited above; FTB Form 3805P instructions).

Approved depositories commonly used by California-owned gold IRAs sit both in and out of state. Brink's Global Services operates an IRS-approved precious metals vault in Los Angeles, giving a California saver an in-state option. Delaware Depository in Wilmington and International Depository Services in Delaware and Texas are common out-of-state options.

Traditional vs Roth precious metals IRA

The precious metals IRA comes in the same two tax shapes as any other IRA. Traditional accounts are funded with pre-tax money and taxed on the way out. Roth accounts are funded with after-tax money and, when qualified, distribute tax-free (source: IRS Publication 590-A and Publication 590-B).

The Roth version has one useful California angle. Because California taxes IRA distributions as ordinary income at rates that reach 13.3% combined, a qualified Roth distribution avoids the entire state tax layer on the way out. The tax is settled up front when the money goes in, and later withdrawals stay out of California adjusted gross income entirely.

Traditional accounts are subject to required minimum distributions beginning at age 73 today for people born from 1951 through 1959, and rising to 75 in 2033 for people born in 1960 or later (source: IRS, Required Minimum Distributions FAQs). A Roth IRA carries no lifetime required distribution for the original owner. Both formats can hold the same IRS-approved metal.

Sources: IRS Publications 590-A and 590-B; 26 U.S.C. Section 408; FTB Form 3805P instructions. Checked June 2026. Consult your tax advisor for your situation.

How it differs from a regular IRA

Two features set a precious metals IRA apart from a regular IRA. The first is the asset. A precious metals IRA holds IRS-approved physical coins or bullion; a regular IRA holds paper assets like stocks, bonds, and funds. That single change drives all the operational differences below.

The second is the account plumbing. A precious metals IRA must be self-directed, which means the custodian permits alternative assets and follows the physical-possession rule for the metal. A brokerage IRA cannot hold physical bullion, because a broker-dealer is not set up to vault and account for it. The self-directed structure is the reason approved custodians and depositories exist.

Fees look different too. A brokerage IRA typically bundles custody into low or zero account fees, with fund expense ratios doing the heavy lifting. A precious metals IRA charges a setup fee, an annual custody fee, and a storage fee tied to the depository, on top of whatever spread the metal dealer earned on the sale. None of those fees is optional, and they compound across the life of the account.

The tax mechanics do not change. Contribution limits, deduction phase-outs, RMD ages, distribution codes on Form 1099-R, and the federal 10% and California 2.5% early-tax stack are identical (sources: IRS Publications 590-A and 590-B; FTB Publication 1005). The difference is what the account holds and who holds it, not how it is taxed.

How it differs from buying physical gold in California

A California resident can also buy physical gold outside a retirement account. The two paths look similar but land in very different tax buckets, so lining them up matters before choosing.

Inside a precious metals IRA, the buyer of record is the custodian. There is no California sales tax on the purchase, because the transaction happens through the retirement account. Gains accumulate without an annual tax bill. On distribution, cash or in-kind metal is taxed as ordinary income federally and in California, and the 10% federal plus 2.5% California early-tax stack applies before age 59.5 with no exception (source: IRS Publication 590-B; FTB Form 3805P).

Outside the IRA, a personal purchase can trigger California sales and use tax. Under CDTFA Regulation 1599, bulk sales of monetized bullion, non-monetized gold or silver bullion, and numismatic coins are exempt when the single-transaction total is $2,000 or more and the seller meets the regulation's registration test. Smaller retail purchases are taxable at the 7.25% statewide base rate plus any local rate (source: CDTFA Regulation 1599 and CDTFA, Sales and Use Tax Rates).

Gains on personally held gold have their own federal quirk. A long-term collectibles gain is taxed at a federal maximum rate of 28% under IRC Section 1(h)(4) and (5), higher than the standard 20% top rate on most other long-term capital gains. California does not use a lower capital-gains rate, so the state taxes the same gain as ordinary income at rates up to 13.3% (sources: 26 U.S.C. Section 1; California FTB, Capital gains and losses).

One more difference matters at death. Physical gold held personally receives a step-up in basis under IRC Section 1014, which resets its cost to fair market value at the date of death. IRA assets do not receive that step-up; an inherited traditional gold IRA distributes as ordinary income to the beneficiary (source: 26 U.S.C. Section 1014).

Contribution limits for 2026

Annual contribution limits for a precious metals IRA are the same as any other IRA, because the account operates under IRC Section 408. For tax year 2026, the base limit is $7,500 for savers under 50, and the catch-up for savers 50 and over is $1,100, for a total of $8,600 (source: IRS Newsroom, IR-2025-111).

Roth eligibility phases out at higher incomes. For 2026, the Roth IRA contribution phase-out is $153,000 to $168,000 for single or head of household filers, and $242,000 to $252,000 for married filing jointly (source: IRS Newsroom, IR-2025-111). A California saver above those ranges cannot contribute directly to a Roth for 2026.

Rollovers are separate from these annual limits. Money moved from a 401(k), 403(b), 457(b), or another IRA into a precious metals IRA does not count against the $7,500 cap, because a rollover is a transfer of existing retirement money, not a new contribution. This is how larger balances arrive in a precious metals IRA.

California does not conform to every SECURE 2.0 change. The state has not adopted the inflation-indexed catch-up for the traditional IRA at the federal level, so the state deduction rules can differ from the federal cap in some edge cases (source: FTB Publication 1005). This is a narrow, situational point best confirmed with your tax advisor for your year.

How California taxes a precious metals IRA

California follows federal characterization of the account. A traditional distribution is ordinary income on the California return; a qualified Roth distribution is not taxed at the state level. There is no California rule specific to metal or in-kind distributions (source: FTB Publication 1005 and FTB, Early distributions).

The state rate ladder has nine brackets topping at 12.3%, plus a 1% Mental Health Services Tax on taxable income over $1,000,000. That yields a top combined marginal rate of 13.3%, the steepest in the country. Most savers never reach the top bracket, but every distribution dollar climbs the ladder just like any other ordinary-income dollar.

The distinctive California feature sits on early distributions. Before age 59.5 with no qualifying exception, the state adds a 2.5% additional tax on top of the federal 10% additional tax under IRC Section 72(t). The California layer is reported on FTB Form 3805P, attached to the state return. Combined, the stack is 12.5% in penalty tax before ordinary income tax at either level (source: FTB, Form 3805P 2025 instructions).

California does not conform to every federal exception. A distribution that escapes the federal 10% may still owe the state 2.5%, so the Form 3805P instructions decide the California result for your case. Consult your tax advisor for your specific situation.

How to open a precious metals IRA

The steps below describe the mechanics a California saver typically follows. They do not constitute financial or tax advice; the details for your account come from your custodian, dealer, and tax advisor.

1. Pick a self-directed IRA custodian. The custodian is the IRS-approved trustee that will legally own the metal on behalf of the IRA. Not every IRA provider offers this; you need one that supports alternative assets under IRC 408(m).
2. Open and fund the account. You can fund it with a new contribution (up to the annual $7,500 limit, or $8,600 if you are 50 or older in 2026), a direct trustee-to-trustee transfer, or a rollover from a 401(k), 403(b), 457(b), or another IRA.
3. Choose an approved depository. The custodian works with a limited list of approved depositories. A California resident can select an in-state option (Brink's Los Angeles) or a common out-of-state vault (Delaware Depository, International Depository Services in Delaware or Texas).
4. Select IRA-approved metals with a dealer. The dealer sells the coins or bars; the custodian pays for them from the IRA's cash balance and takes legal title. Confirm every item satisfies IRC Section 408(m)(3): the coin carve-out or the industry-recognized minimum fineness.
5. Have the metal shipped to the approved depository. The dealer ships direct to the depository, not to you. Personal receipt of the metal is a deemed distribution under the IRS Issue Snapshot on collectibles.
6. Track statements and reporting forms. The custodian sends Form 5498 annually for account value and contributions, and Form 1099-R when a distribution occurs. Keep both for your federal and California returns.

If a step is unclear, or if a dealer promotes premium or graded coins as IRA-eligible, pause and check with your custodian or tax advisor before signing.

Fees inside a precious metals IRA

A precious metals IRA carries fee categories a brokerage IRA does not. Understanding them is part of understanding what the account is, because the fees are part of the operational cost of the physical-possession requirement.

• Setup fee. A one-time charge to open the account with the self-directed custodian.
• Annual custody fee. A recurring charge for the custodian's administrative work, distinct from the depository fee.
• Depository storage fee. The vault charges to store the metal, sometimes on a flat schedule and sometimes as a percentage of the account's fair market value.
• Dealer spread on the metal. The premium the dealer earns above the metal's spot price, embedded in the sale price at the time of purchase.
• Wire and shipping fees. Charged by the custodian or dealer for funding, deliveries to the depository, and distributions.

Each fee is small on a single line. The combined drag matters most on smaller accounts, where flat fees consume a bigger share of the balance. See our dedicated page on gold IRA fees explained for California investors for how the categories compound over time.

When a precious metals IRA is a bad idea

A balanced read has to name when the account is a poor fit. Several situations make the structure work against a California saver rather than for them.

• The account balance is small. Flat setup, custody, and storage fees consume a much larger share of a $10,000 balance than a $100,000 balance. The fixed-cost drag can erase real returns.
• You need the money soon. Selling physical metal inside the IRA requires the dealer or custodian to liquidate it, which takes time and locks in a spread. If you might need the funds within a few years, cash and short-duration bonds behave better.
• You want the metal to touch your hands. Home storage is not allowed, so the account owner never physically holds the metal. Personal-possession preference is a real reason to buy physical gold outside a retirement account instead.
• You are under 59.5 and might take an early withdrawal. The 12.5% combined federal and California early-tax stack sits on top of ordinary income tax. Selling metal to fund a short-term need through the IRA is the costliest way to do it.
• You want tax-loss harvesting flexibility. Losses inside any IRA, precious metals or otherwise, do not offset personal capital gains. If tax loss capture is central to your strategy, the wrapper matters.
• Your income exceeds the Roth phase-out and you want state-tax-free withdrawals. Above the 2026 Roth caps, direct Roth contributions are unavailable. A backdoor Roth adds paperwork and tax complexity that not every saver wants.

None of these facts makes the account wrong. They mean the account is fit-specific. A frank conversation with a tax advisor about balance size, time horizon, and income level is the right first step before opening one.

Precious metals IRA questions, answered

What is a precious metals IRA in one sentence?

A precious metals IRA is a self-directed individual retirement account that holds IRS-approved physical gold, silver, platinum, or palladium under IRC Section 408(m)(3), with an approved trustee holding the metal in an approved depository. It follows every rule that applies to any other IRA, and its tax treatment is identical, with the metal simply replacing the paper assets a normal IRA holds.

Which metals and coins qualify for a precious metals IRA?

Gold, silver, platinum, and palladium bullion qualify if it meets the industry minimum fineness the IRS recognizes: gold .995, silver .999, platinum .9995, and palladium .9995. Coins described in 31 U.S.C. Section 5112, including American Gold, Silver, Platinum, and Palladium Eagles, also qualify. Numismatic and graded rare coins outside the 31 U.S.C. 5112 list do not qualify.

Can I store the metal at home if I own the IRA?

No. IRC Section 408(m)(3)(B) requires the qualifying bullion to be in the physical possession of an approved trustee. Taking the metal home is treated as a deemed distribution equal to its cost, taxed as ordinary income, plus the 10% federal and 2.5% California additional tax if the owner is under 59.5. The IRS Issue Snapshot on collectibles states this directly.

How is a precious metals IRA taxed in California?

A traditional precious metals IRA is taxed like any traditional IRA. Contributions may be deductible, growth is tax-deferred, and each qualified distribution is ordinary income on your California return at rates that reach 13.3% at the very top. A qualified Roth distribution is tax-free federally and in California, because the tax was paid up front on the contribution.

What is the 2026 contribution limit for a precious metals IRA?

For 2026, the base annual IRA contribution limit is $7,500 for savers under 50 and $8,600 for savers 50 and over, with a $1,100 catch-up per IRS Newsroom IR-2025-111. Rollovers from a 401(k), 403(b), 457(b), or another IRA are separate from these limits, so a larger balance can arrive by rollover without counting against the $7,500 cap.

What is the difference between a precious metals IRA and a gold ETF?

A precious metals IRA holds physical bullion in the physical possession of an approved trustee under IRC Section 408(m). A gold ETF is a paper security that tracks the metal's price and can be held inside a normal brokerage IRA. The ETF is convenient and low-fee, but you never own physical metal, and its tax treatment inside a taxable account differs from personal physical gold.

What is the total penalty on an early withdrawal from a California precious metals IRA?

Before age 59.5 with no qualifying exception, the federal additional tax is 10% and the California additional tax is 2.5%, for 12.5% combined. That penalty sits on top of ordinary income tax at both levels, so the early route is the costliest way to take money out. See our page on early gold IRA withdrawals in California for the specific mechanics.

Can I open a precious metals IRA if I already have a 401(k) with my California employer?

Yes. Most Californians fund a precious metals IRA through a rollover, either after separating from the employer or by rolling over an eligible portion of a prior 401(k), 403(b), 457(b), or IRA. Direct trustee-to-trustee transfers avoid the 20% mandatory federal withholding that applies to distributions paid to you personally.