Can the IRS Take My Gold?
When investing in precious metals through an IRA, there are specific tax considerations. Individuals must thoroughly understand these concerns prior to making purchases.
Typically, the IRS considers physical gold and silver to be collectibles that are subject to tax at a maximum rate of 28%.
What is the IRS’s position on gold?
Physical gold investments are considered collectibles for tax purposes and any gains are taxed at a much higher 28% collectors’ rate rather than the more standard 15% long-term capital gains (LTCG) rate that applies to most investment assets and taxpayers. To minimize taxes, investors may prefer investing via mutual funds or futures ETFs that focus exclusively on gold investing.
IRAs typically prohibit investments in collectibles, with an exception introduced in 1986 allowing U.S. gold and silver coins. The rule was broadened in 1998 to cover 99.5% pure bullion as well as physical-backed precious metal ETFs like GLD which did not meet this threshold (PLR 200732026).
IRA rules stipulate that when moving precious metals between accounts, an exchange must take place that involves “like-kind” precious metals – such as exchanging silver for gold or bars of both. Unfortunately, the IRS has yet to clarify if numismatic gold coins would qualify as like-kind with bullion-type coins that derive value solely from their gold content rather than historical or aesthetic considerations. Should the IRS rule that such coins do not match up as an equivalent tradeable product it could significantly disrupt industry dynamics and make moving IRA metals between accounts much harder.
Do I need to report my gold to the IRS?
Some individuals wish to sell their precious metals anonymously so as to prevent the government, banks, and other individuals from learning about their transactions. It is surprisingly straightforward when working with professional buyers – particularly person-to-person sellers offering cash or electronic transfers as the preferred methods; although if needed it’s also possible to sell via companies offering checks and bank wire transfers as potential options.
However, you should remember that these companies must report all bullion transactions to the Internal Revenue Service under “Know Your Customer” legislation to prevent money laundering and other crimes. Furthermore, dealers must fill out Form 8300 which reports significant commodity exchanges within the U.S.
Profits made from purchasing gold are generally subject to capital gains taxes as the IRS considers physical gold and silver collectibles. Gains on such assets may be taxed at the same rate as short-term capital gains tax rates (capped at 28%), unlike most other investment assets which typically incur lower tax rates.
Do I need to pay taxes on my gold?
There is no legal way around paying taxes on gold purchases; any dealer advertising any “tricks” or loopholes to circumvent this is a major red flag. With careful tax planning, however, capital gains taxes on your gold sales can be kept to a minimum.
Purchases of physical gold coins and bars as well as investing in ETFs holding physical bullion are considered collectibles and are taxed at up to 28%; this rate is far higher than what would typically apply when considering long term capital gains rates for stocks and most other investments.
The IRS mandates that dealers reporting profits made from selling precious metals as income on 1099B forms to assist the agency with keeping tabs on individuals trading these items as a source of income and prevent tax evasion.
The IRS does not typically require dealers to report purchases of physical bullion from individual investors unless their investments involve large quantities of specific bullion pieces with cash payments exceeding $10,000. As regulations can change periodically, it is wise to always consult a qualified tax professional when reporting precious metal transactions to the IRS.
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