Are Gold Coins Taxable?
Gold coins provide investors with alternative investments, but there are certain tax considerations associated with their sale that must be addressed correctly. This article will address how to report gains from precious metal sales to the IRS.
Taxable income is defined as adjusted gross income minus allowable itemized and standard deductions, including gold coin sales under collectibles category which have profits taxed at maximum rate of 28%.
Capital Gains Tax
When a precious metals dealer sells coins and bullion at prices higher than what their customer paid, the IRS typically requires them to file Form 1099-B or 8300 with them for reporting cash transactions of more than $10,000 to assist in combatting money laundering and other forms of illegal activity.
Gold and other precious metals must be reported for capital gains tax (CGT). CGT refers to any increase in value over time that results in profit when sold, typically taxed at a lower rate than ordinary income and up to 28% for long-term investments.
Your choice of precious metals for sale will dictate which tax bracket you fall into. While physical gold pieces might be considered collectibles, investments in futures markets or other financial assets won’t be taxed at the same rate since the IRS doesn’t consider them physical goods; rather they are treated as financial assets with differing taxation rates.
CGT can be an intricate subject and the exact amount you owe will depend on various factors including how much your metals were worth when sold, the length of ownership, and your tax bracket. When selling coins, their fair market value at time of sale is determined by subtracting its purchase price from current gold spot price; then multiplying this difference times your tax bracket number for an approximate taxable amount.
Tax implications on gold purchases and sales depend on whether they involve bulk transactions. Bulk sales are defined by the IRS as any sale of monetized bullion (monetized gold or silver) where its total market value exceeds $2,000.
Futures contracts offer one effective strategy to avoid paying taxes on precious metal investments by shifting away from physical ownership and being taxed at regular income rates instead of capital gains rates. While futures contracts offer this solution, you should still always consult a financial expert to make the best decision for yourself and your personal circumstances.
Texas sales taxes exempt most numismatic and bullion coins from sales tax, meaning most customers don’t owe sales tax when purchasing precious metals from Texas dealers. Unfortunately, however, this exemption doesn’t extend outside of the state; therefore sales tax will still be added when placing orders online or over the phone from non-Texas dealers. To prevent unnecessary tax expenses it would be a good idea to ask beforehand what their policies on sales tax are before making your purchase decision.