Coins That Are Not IRA Eligible, Including Krugerrands

Few questions come up as often as "Is the Krugerrand IRA eligible?" The short answer, on our reading of the statute, is that it does not appear to fit, but the reason is more specific than most dealers' web pages suggest. No IRS rule names the Krugerrand. The rule is a general one about collectibles, and a coin has to fit one of its exceptions.

This page explains how that rule works, why the Krugerrand does not appear to fit, and which other kinds of coins run into the same problem. For the full list of what does fit, see our guide to IRA-eligible precious metals. Parts of this topic are interpretation, and we mark those parts.

Why aren't Krugerrands IRA eligible?

Our reading of the statute has three steps.

1. Every coin starts as a collectible. The tax code lists "any stamp or coin" and "any metal or gem" among its collectibles (26 U.S.C. 408(m)(2)).
2. An IRA that buys a collectible is treated as taking a distribution. The statute says the purchase "shall be treated ... as a distribution from such account in an amount equal to the cost to such account of such collectible" (408(m)(1)). The IRS says the amount is "generally taxed as ordinary income" and that a 10% additional tax "may apply if the participant is under age 59½" (IRS).
3. The Krugerrand doesn't clearly fit an exception. Section 408(m)(3) excludes two groups from the collectible definition. As far as we can tell, a Krugerrand is not on the first list. Whether it fits the second depends on its purity.

Notice what is missing from this chain. The statute does not say "Krugerrands are banned." It simply never lists them. We did not find an IRS page that names the Krugerrand as ineligible in the sources we reviewed. So when someone says "the IRS bans Krugerrands," that is a shorthand for the reasoning below, not a quote from a rule.

What does the statute actually allow?

Section 408(m)(3) has two exceptions.

The list of coins

The first covers specific coins: a gold coin described in paragraph (7), (8), (9) or (10) of 31 U.S.C. 5112(a), a silver coin described in 5112(e), a platinum coin described in 5112(k), or "a coin issued under the laws of any State" (408(m)(3)(A)). The IRS lists "Certain gold, silver, or platinum coins described in 31 USC Section 5112" and "Any coin issued under the laws of any state" (IRS).

Title 31, section 5112 begins: "The Secretary of the Treasury may mint and issue only the following coins," and then sets out specifications. It describes, for example, "A fifty dollar gold coin that is 32.7 millimeters in diameter, weighs 33.931 grams, and contains one troy ounce of fine gold," and a silver coin that must "contain .999 fine silver" with a design of "an eagle on the reverse side" (31 U.S.C. 5112). These are specifications for coins the U.S. Treasury may mint. We did not find the Krugerrand described in the paragraphs the statute points to. The statute says "any State" without further definition. We read that as a U.S. state, so a Krugerrand doesn't appear to fit it either. That is our reading of the text.

The bullion path

The second exception covers "any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 5 of the Commodity Exchange Act, 7 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract," as long as the bullion is "in the physical possession of a trustee" (408(m)(3)(B)).

Two things follow from this wording:

• The statute sets no purity number. It borrows a standard from regulated futures markets.
• The test is about fineness, meaning the share of pure metal. It is not about whether a coin is famous, popular or a "bullion coin" by name. See fineness and purity.

How pure is a Krugerrand?

Rand Refinery's website describes the Krugerrand as made from 22-carat gold, with 9167 parts pure gold and 833 parts copper (Rand Refinery). That is a company statement about its own product. In percent terms it is 91.67% gold. Copper is added to the alloy on purpose, and the refinery says it helps keep the coins from being scratched or defaced.

Our reading runs like this. The bullion path in (B) refers to the minimum fineness a contract market requires for metals delivered against a regulated futures contract. CME Group's COMEX rule 113101 for gold futures says: "Gold delivered under this contract shall assay to a minimum of 995 fineness and must be a brand approved by the Exchange" (CME Group). A coin that is 91.67% gold is below .995, so it does not appear to use path (B). As far as we can tell it isn't one of the listed coins in (A) either, so it appears to remain a collectible.

We want to be clear about what we did and didn't confirm. We confirmed the statute's wording, the IRS summary, the issuer's stated composition and the COMEX gold rule quoted above. We did not confirm that COMEX is the only contract market relevant to the statute, or how any other exchange sets its minimum. Treat the "below the futures standard" step as our reading of the statute, not as an IRS ruling. A tax professional can tell you how the rule applies to a specific purchase.

What decides eligibility in practice?

Your IRA custodian does. A custodian is the bank or approved non-bank company that holds the account's assets. Each custodian sets its own rules for the products it will hold, so a coin that fits the statute is not automatically accepted by every custodian. Questions to ask a custodian: Which specific coins or bars do you accept? Do you accept this one by name?

A dealer saying a product is "IRA approved" is not a tax ruling. Neither is a custodian's acceptance. Our page on bullion versus numismatic coins covers what regulators warn about when collectible coins are pitched for IRAs.

Which other coins may run into the same problem?

The table applies the statute's wording to some groups readers ask about. It is a summary of how the rule works, not a ruling on any product.

What about pre-1933 U.S. gold coins?

A coin being "American" or from the "U.S. Mint" is not by itself a test in the statute. We reviewed the statute and the IRS page, and neither mentions a coin's age or a 1933 date. Under the text, an old coin valued by collectors is still a "coin," so it is a collectible unless it fits one of the two exceptions.

We did not find an IRS or U.S. Mint source for the claim that pre-1933 gold coins are eligible, so we can't confirm it. Whether a particular older coin fits an exception can turn on its exact specifications and on the custodian's rules. A question to put to a custodian and a tax professional before any purchase: does this specific coin fit an exception, and on what basis?

What about rare and graded coins?

Grading measures condition. It does not appear anywhere in the collectibles statute. Rarity, condition and age drive a coin's collector value (see bullion versus numismatic coins), but none of them is mentioned in the exceptions, so they do nothing for its tax status.

What happens if my IRA buys a coin that doesn't qualify?

The IRS states: "A plan participant whose account acquires a collectible is deemed to receive a distribution in the year the collectible is acquired. The amount of the distribution is the cost of the collectible at the time it is acquired." (IRS).

Here is an example with made-up numbers. An IRA owner, age 55, has the IRA buy coins that don't fit an exception, at a cost of $20,000. The IRA is treated as having distributed $20,000 in that year. The IRS says that amount is generally taxed as ordinary income. The owner is under 59½, so the 10% additional tax may also apply. Because the statute and the IRS refer to "cost," our reading is that a later change in the coins' value doesn't change the amount.

Questions worth asking before any purchase: Has the custodian confirmed this specific product? Who holds it? What is the cost the IRA would pay, since cost is the measure in the rule?

Edge cases and common mistakes

• Assuming "gold coin" means "IRA coin." Gold content alone doesn't settle it. Every coin starts as a collectible.
• Assuming "bullion coin" settles it. The bullion path is about fineness and custody. Section 408(m)(3)(B) does not use the phrase "bullion coin."
• Relying on a coin's popularity. Name recognition is not a test in the statute.
• Taking possession at home. The bullion exception requires physical possession by a trustee. See the IRA collectibles rule for more on custody.

Related questions

Are gold bars treated differently from coins?

Bars are not on the list of coins in (A), so a bar generally has to qualify under the bullion path in (B), which looks at fineness and trustee possession. See our guide to IRA-eligible gold bars.

Does the same rule apply to silver and palladium?

The same section covers silver, but the routes differ by metal. Silver coins can fit through the 31 U.S.C. 5112(e) reference in (A)(ii) or through the bullion path. Palladium is not in the (A) coin list, so palladium has only the bullion path in (B), alongside gold, silver and platinum. See our silver IRA page.

Can I hold a Krugerrand outside my IRA?

The collectibles rule applies to IRAs and similar accounts. Rules for coins you own personally are a different subject, and this page doesn't cover them.

This page explains the law in general terms and isn't tax or legal advice. Because parts of this topic involve interpretation of the statute, check with a qualified tax professional or attorney before buying.