If you feel a little daunted by the way gold is taxed, don’t fret. You’re not alone. Gold is a unique investment. Like any investment, it’s subject to some pretty complex tax rules. Add in the many ways you can own it and the complexity goes up. In this post, we’ll try to answer some of the common questions around taxes on gold & silver investments including:
Here’s why it’s important to check with your certified public accountant about taxes on your gold investments…
• Rules can and do change. Getting it wrong can be very costly (not to mention the stress of dealing with the IRS).
• Your tax bracket and other personal considerations may make a difference.
• State capital gains tax rates vary.
• Those outside the US must adhere to their own country’s tax laws.
So, let us try to lay it out as clear as we can, by addressing the the two big topics: taxes and reporting…
There is a lot of conflicting and inaccurate tax information on the internet about taxes on gold and silver. And if you listen to the wrong sources, you can get hurt.
For example, we’ve found a few websites that claim the sale of American Silver Eagles is exempt from capital gains tax, based on an obscure law. While the law may read like you can sell gold and silver without paying taxes, that doesn’t mean it translates into practice with the IRS. In the case of the American Silver Eagle, it’s patently false.
Here’s what you need to know about taxes when you sell gold and silver…
Capital Gains Tax
The IRS considers precious metals a “collectible” for income tax purposes. Gains on collectibles held for less than one year are taxed as ordinary income – the same tax treatment as short term capital gains. Gains on collectibles that are held for more than one year are treated as long term and taxed at a maximum rate of 28%. So if you are in a federal tax bracket of 28% or greater, your net long-term gains from collectibles are taxed at 28%. If you are in a federal tax bracket lower than 28%, your net long term gains from collectibles are taxed at your regular rate. The “collectibles” designation includes most forms of investment grade gold and silver, including:
• All denominations of precious metal bullion coins and numismatic coins, bars, wafers, etc.
• Precious metal “rounds” and commemorative coins
• Certificates such as those from the Perth Mint
• Certain Exchange Traded Funds (ETF’s). Precious metal ETF’s are generally divided into three categories: physical-backed ETF’s structured as grantor trusts, such as the popular GLD.
Again, talk to your accountant and/or lawyer to maximize your tax position before investing.
Sell any form of precious metal at a profit and the profit will be taxed at a federal rate of 28% or less. Sell any form of precious metal at a loss and it will be used to offset any capital gains you have.
Privacy & Reporting
One of the many advantages of owning physical gold and silver is that they can be private and confidential. There aren’t too many investments you can say that about today.
So naturally, we get a lot of questions on this topic. Maybe you’ve wondered yourself…
• Are my purchases private?
• What do you report to the IRS when I sell back to you?
Private and Confidential? Yes, But…
First, when it comes to privacy and confidentiality, there are two issues to consider: buying and selling.
When you buy precious metals in the US…
The transaction is almost always private. There is no reporting requirement from a gold dealer to the IRS of what we sold to you, unless BOTH of the following conditions exist:
1. The transaction(s) exceed $10,000; AND
2. Actual cash (or money orders, bank or certified checks, etc.) is used to make the purchase(s).
In this highly unlikely event, a dealer would be required to file a Form 8300 with the IRS, as well as a Suspicious Activity Report (SAR) with the Financial Crimes Enforcement Network (part of the U.S. Department of the Treasury), due to regulations under the U.S. Patriot Act and Anti-Money Laundering (AML) rules.