Encyclopedia · Law and policy
Legal tender
Legal tender is money a creditor must accept in settlement of a debt. It is a legal status conferred by statute, not a statement about value.
Working knowledge
The greenbacks authorised in 1862 were legal tender for most debts while not being redeemable in coin — which is precisely why the status matters.
Legal-tender status does not stop a currency from losing purchasing power. Those are two different questions.
Advanced
Some bullion coins carry a nominal legal-tender face value far below their metal value. That face value is a legal formality, sometimes with tax consequences, never a floor on market price.
Professional practice
State-level legal-tender statutes for gold and silver exist and generally affect state tax treatment rather than federal obligations. Treatment varies and should be checked with a tax professional in your state.
Where people go wrong
- Reading legal-tender status as a guarantee of value.
- Assuming a coin's face value has any bearing on what it is worth.
Sources for this entry
- Library of Congress — United States Statutes at Large, Volume 12 (1859–1863)The enacted text of the Legal Tender Act of February 25, 1862, which authorised United States notes — greenbacks — as legal tender not redeemable in coin on demand.
- Library of Congress — United States Statutes at Large, Volume 31 (1899–1901)The enacted text of the Gold Standard Act of March 14, 1900, which fixed the gold dollar as the standard unit of value.
- Legal Information Institute, Cornell Law School — 26 U.S.C. § 408(m) — collectibles and the bullion exceptionsThe statutory rule treating collectibles held in an IRA as a distribution, and the narrow exceptions for specified coins and for bullion meeting exchange-contract fineness held by a trustee.
Last reviewed 2026-09-14
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