Are Gold Coins Taxable?
Customers do not typically owe sales taxes when purchasing gold coins; however, when selling for profit they must pay federal capital gains taxes.
Be it an active investor or simply curious, knowing which taxes apply to precious metal purchases and sales is key.
Capital Gains Tax
Gold coins gifted or inherited from someone else may be subject to capital gains tax when sold, with the IRS calculating your profit using their market value at the time they were given to you or when their original owner died, known as your cost basis calculation. This calculation takes into account any fees related to purchasing or storing them as part of its calculation.
Hold your coins for more than one year before selling them and the profits are considered long-term capital gains, subject to lower taxation than short-term capital gains depending on your income level and filing status.
Purchases of gold coins from dealers licensed to collect state sales taxes may allow you to avoid sales taxes; however, any applicable federal or provincial capital gains taxes still must be paid.
Sales Tax
Though paper investments generally are exempt from sales taxation, many states impose sales taxes on precious metals due to being real commodities instead of financial instruments subject to capital gains taxes.
Coins, like any investment, are generally taxable; however, there may be exceptions; for instance, when selling coins purchased and held for less than one year they will likely be classified as short-term capital gains and taxed at your personal tax rate based on income and filing status.
If you own coins for more than one year and sell them without paying sales tax, reporting it as long-term capital gains (LTCG) could save you from incurring sales taxes on their sale. To calculate profit from selling gold coins, subtract purchase price from selling price then add any transaction fees or expenses.
Gift Tax
When an individual acquires physical precious metal assets, they should keep track of their cost basis. Even those receiving coins and bullion from others must know their original purchase price, since capital gains taxes could apply when selling any increased values in later sales transactions if this asset had an initial cost basis that later increased substantially in value if sold – with two exceptions that exclude inheritance coins altogether.
First, heirs inheriting gold coins take over the cost basis, which may alter their tax liability. Second, they can avoid capital gains tax by selling the coins at a loss and deducting that loss from other investment profits on their tax return. Gold coins may not be subject to sales tax in most states but investors still must pay both short and long-term capital gains taxes when selling them for profit unlike with stocks or mutual funds which have more lenient capital gains laws.
Inheritance Tax
In the United States, any profits you earn when selling assets are subject to taxes. The IRS assesses these profits at different rates depending on your tax bracket and filing status; for instance if you buy and sell gold coins within one year they will incur short-term capital gains taxes; however if you wait over 12 months they could incur either zero, 15%, or 20% depending on filing status.
While selling precious metals as an inheritance is subject to unique procedures, your basis should be calculated based on market value as of the day they died of whomever gifted it to you – as opposed to what most gold bullion coin sales entail which are calculated using market value on purchase date. Therefore, keeping careful records of investment costs and sales prices can help minimize your tax bill and help ensure smooth tax proceedings.
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