Gold IRA Fineness: Why .995 Matters

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What fineness means on a gold coin or bar

Fineness is the share of pure gold in a coin or bar. It is written as a decimal or a percent. A stamp of .999 means 99.9 percent pure gold. A stamp of .9999 means 99.99 percent pure gold. Bullion refiners round to three or four decimals depending on the product line.

Fineness answers one question: how much of the piece is actually gold and how much is alloy. Alloy is the copper, silver, or other metal added to make the coin durable in circulation. A 22 karat coin is roughly 91.67 percent gold and about 8.33 percent alloy.

The IRS uses fineness as a bright line. A precious-metals IRA can hold bullion only when the stamped fineness meets a set floor for the metal. Below that floor, the piece is treated as a collectible and cannot sit inside the tax wrapper. The rule is not editorial; it comes straight from the tax code.

Where the .995 gold floor comes from

The 99.5 percent gold floor is not the IRS picking a round number. IRC Section 408(m)(3)(B) allows bullion of a fineness equal to or exceeding the minimum fineness that a US commodity contract market requires for delivery on a regulated futures contract. For gold, that market is COMEX, part of the CME Group.

COMEX runs the largest gold futures market in the world. Its 100 troy ounce gold futures contract lists deliverable bars at a minimum fineness of 995 parts per thousand, or 99.5 percent. That specification has been the delivery grade for decades. The tax code piggybacks on it rather than setting a separate purity standard.

The mechanism is neat. When Congress needs an objective purity threshold for bullion, it does not write one from scratch. It points to the futures market and adopts whatever the delivery contract already requires. If COMEX raised its floor, IRC 408(m)(3)(B) would follow.

Karat versus fineness in plain numbers

Karat is a traditional purity scale. Pure gold is 24 karat. Every karat below 24 is one twenty-fourth less pure. A 22 karat piece is 22 divided by 24 of pure gold, which works out to 91.67 percent. An 18 karat piece is 18 divided by 24, or 75 percent.

Fineness is the same idea expressed as a decimal share of pure gold. Modern bullion is stamped in fineness (.999, .9999). Older coinage and jewelry are labelled in karats. Both point to the same underlying number; only the format differs.

The chart below places common karat levels on the fineness scale next to the 99.5 percent IRS floor. Only 24 karat gold clears the floor on fineness alone. Every karat level below sits under the line, which is why 22 karat, 18 karat, and 14 karat jewelry gold never qualifies for a self-directed IRA on fineness grounds.

The 22 karat row is the trap. It matches the fineness of the American Gold Eagle and the Krugerrand. The Eagle rides a statutory exception written into 31 USC 5112(a). The Krugerrand does not, so it fails. Karat alone tells you nothing about eligibility; you have to check the source statute too.

Silver, platinum, palladium floors

The 408(m)(3)(B) mechanism applies equally to silver, platinum, and palladium. Each floor tracks the delivery specification of the matching US commodity contract. The numbers rise slightly because the industrial-grade thresholds sit higher than the gold floor.

The pattern is worth reading twice. Congress set no fixed purity number in the tax code. It delegated the number to the commodity market and named a handful of US coins as fallback carve-outs. That is why the American Silver Eagle qualifies under two paths, while the Krugerrand qualifies under none.

The American Gold Eagle: the one statutory exception

The American Gold Eagle is the only gold coin allowed to sit below the .995 floor in an IRA. Its actual fineness is 91.67 percent, roughly 22 karat. The rest of the alloy is copper and silver, which gives the Eagle a warmer color and higher durability than pure gold.

Eligibility does not rest on fineness. It rests on Path A of the tax code. IRC 408(m)(3)(A)(i) references 31 USC 5112(a) paragraphs 7 through 10, which authorize the US Mint to strike the Eagle series at the 22 karat alloy. Because the tax code names those paragraphs directly, the coin qualifies regardless of purity.

The mechanism carries over to other US Mint bullion. The American Silver Eagle rides 31 USC 5112(e). The American Platinum Eagle rides 31 USC 5112(k). Each coin gets a named statutory carve-out on top of any fineness-based qualification. Foreign 22 karat coins have no such fallback.

Proof American Gold Eagles are also allowed, with one condition. The coin must ship from the US Mint or the dealer in original mint packaging with the certificate of authenticity intact. A loose proof coin is treated as numismatic, which falls back under the general collectibles ban.

Fineness rules for bars: refiner accreditation matters too

Bars have to clear .995 fineness like coins. They also carry a second requirement that coins usually skip. The refiner or assayer that produced the bar must be on an approved list.

The main list is the London Bullion Market Association Good Delivery List, or LBMA. Only refiners that pass a strict quality audit make it onto the list. A bar stamped by an LBMA member with the correct weight, fineness, and hallmark is normally accepted by every self-directed IRA custodian in the United States.

COMEX and NYMEX maintain parallel lists of approved brands for gold, silver, and platinum-group bars deliverable against their futures contracts. A brand on those lists is also accepted. National mints such as the Perth Mint, the Royal Canadian Mint, and the Austrian Mint are treated the same way when they produce bars stamped to bullion specifications.

A .9999 bar with no recognized refiner mark will be rejected. Fineness stamped on a piece of metal with no accreditation trail behind it does not close the audit loop. Ask the dealer for the refiner name in writing before you buy, and confirm the name against the custodian's product list.

How to verify the fineness of a coin or bar

Fineness verification happens before the custodian releases IRA cash to the dealer. Six checks catch nearly every mismatch and prevent an accidental prohibited transaction. Run them in order.

1. Read the fineness stamp. Look for a mark such as .9999, .999, .995, or 995. On coins, the fineness is usually stamped on the reverse. On bars, it appears on the face along with the refiner name and serial number.
2. Convert karat to fineness if needed. Older coins are labelled in karat. Divide the karat number by 24 to get the fineness share. A 22 karat coin is 22 divided by 24, or 91.67 percent. A 24 karat coin is 99.99 percent or higher.
3. Compare against the metal's IRS floor. Gold 99.5 percent, silver 99.9 percent, platinum 99.95 percent, palladium 99.95 percent. Any product at or above the floor clears Path B of 408(m)(3).
4. Check for a statutory carve-out if below the floor. A sub-floor coin qualifies only if a US statutory paragraph names it. The American Gold Eagle, American Silver Eagle, and American Platinum Eagle are the main names on that short list.
5. Verify the refiner on a bar. Look up the refiner name on the LBMA Good Delivery List or the CME Group approved brands list. If the name is missing, the bar is rejected regardless of the stamped fineness.
6. Match the product to the custodian's list. Ask the self-directed IRA custodian for its accepted bullion list in writing. Custodians may accept a narrower set than the statute allows. If the product is not on their list, do not order.

What happens if a product fails the .995 test

A single sub-fineness coin can taint the whole IRA. The general rule of IRC 408(m) treats collectibles held in an IRA as a distribution. The tax result is the same as taking the cash out of the account.

The full fair market value of the disallowed asset is added to your ordinary income for the year. If you are under age 59.5, the federal 10 percent early-withdrawal penalty also applies to that amount. Interest and additional penalties can follow if the IRS discovers the position on audit years later.

The rule reaches home storage too. The Tax Court's 2021 decision in McNulty v. Commissioner confirmed that IRA metal taken home is a distribution, even if the taxpayer never intended to withdraw. Fineness clears one legal test; custody clears the other. A coin that passes fineness but is kept at home still triggers a full taxable event.

Texas residents keep one advantage in a failure scenario. The state levies no personal income tax under Article 8, Section 24 of the Texas Constitution. Federal ordinary rate and the 10 percent penalty apply; no Texas state tax layer stacks on top of them.

Texas custody: fineness plus the state depository

Fineness is only half the eligibility puzzle. The other half is custody. Under IRC 408(a)(2), an IRA must be held by a bank or an IRS-approved non-bank trustee. For a precious-metals IRA, that trustee must hold the metal in a qualifying depository.

Texas is one of the few states with an in-state option built around this rule. The Texas Bullion Depository sits in Leander, north of Austin. It is an agency of the State of Texas created by House Bill 483 of the 84th Legislature and signed by Governor Greg Abbott on June 12, 2015. Operations began in 2017.

The depository is operated under state contract by Lone Star Tangible Assets LP. In 2023, Lone Star Tangible Assets received IRS non-bank trustee status from the Department of the Treasury. Equity Trust Company acts as the first custodian partner. That opens IRA storage at the depository for retail investors.

For an IRA use case, the process runs like any other depository. You open a self-directed IRA with Equity Trust or another qualified custodian, fund the account, and place a buy direction on IRA-eligible coins or bars. The dealer ships the metal directly to Leander, where the depository confirms receipt in segregated storage under the Texas Comptroller's oversight. Source: texasbulliondepository.gov IRA Storage page, checked June 2026.

Fee drag on high-premium products

The .995 rule polices which product can enter the IRA. It does not police the premium the dealer charges over spot. Two coins that both clear .995 can carry very different premiums, and premium leaks compound as recurring fees over time.

The calculator below models the compounded drag from custodian, storage, and administration charges on the account. Use it to see how a small percent charge, applied year after year, erodes the ending balance on a Texas gold IRA held to age 73 or 75.

The tool is a planning model, not personalized advice. It does not include the one-time dealer markup at purchase, which is a separate line item from the recurring fees the tool captures.

Worked example: an El Paso resident sorts three offers

When ".995 eligible" is the wrong reason to buy

Frequently asked questions

By the Harry’s Coins Editorial team. Last reviewed June 2026.