Do You Pay Taxes When You Sell Gold?
Many individuals sell Gold for various reasons. This could be to close on their home loan, cover college tuition costs for their child or simply cashing out an investment portfolio.
The IRS recognizes precious metals such as gold bullion bars and coins as collectibles for income tax purposes; however, this doesn’t automatically result in any capital gains taxes due when selling your physical gold.
Capital Gains Tax
Your capital gains tax rate depends on both how long you’ve owned an asset and your federal income tax bracket. Capital gains represent any positive difference between its sale price and purchase price – such as investments such as stocks, mutual funds, real estate properties, vehicles or digital collectibles that you sell off – and their purchase prices – in particular any investments relating to stocks mutual funds real estate vehicles digital collectibles even your home itself.
Dependent upon your filing status and income level, you could be subject to either short-term capital gains tax or long-term capital gains tax. In general, the longer an asset has been owned before any taxes become payable are reduced.
To calculate net capital gain, you’ll need your cost basis information, which should be available from each investment confirmation statement from your broker. This will allow you to estimate how much profit will result when selling off assets; additionally, use the IRS capital gains tax calculator as another resource; this calculator allows for accurate tax calculation based on filing status and size of profits earned.
Inheritance tax is an income tax levied by many jurisdictions on the sale of certain property, including precious metals, at their time of sale. The value of each item sold at sale time determines its impact.
Gold and other precious metals inheritable through an estate are subject to tax at their fair market value, determined by an expert appraiser. This figure represents the price at which these objects would change hands between willing buyer and seller without either feeling pressured to either buy or sell.
When it comes to inheriting gold and other physical precious metals, the cost basis is defined as the original purchase price paid for them. Additional expenses like storage fees or delivery charges may also be factored into this cost basis; in these instances a step-up in basis can help lower capital gains taxes dramatically. Furthermore, any capital losses from other collectibles sold can also be offset against this sale to further decrease taxes owed.
Reporting to the IRS
IRS rules dictate that all gold sales must be reported, with your choice of metal determining how much tax is due. Bullion can be bought as coins or bars while 22-carat jewelry such as ornaments can symbolize wealth or good luck.
The IRS considers precious metals to be capital assets and any financial gain you reap from selling them is considered taxable income. Dealers are required to submit Form 1099-B with any sales that exceed a threshold limit to the IRS for tax reporting purposes.
Dealers that fail to report sales to the IRS could incur heavy fines. Before engaging in any gold transactions, be sure to consult with a tax professional and always maintain records of purchases and sales. Also watch out for unscrupulous dealers that use fears of being investigated by the IRS as justification for increasing prices on coin sales, which could eat into your investment return compared to purchasing gold coins or ETFs.
Taxes on Dealers
As with any investment, when selling physical gold for more than its purchase price, the IRS may demand its share. How much you owe will depend on how long you held them and your income tax bracket; gains on investments sold within a year are subject to regular income rates while long-term gains can incur up to 28% taxation rates.
Precious metal dealers must also file forms 1099-B and 8300 with the IRS for sales that surpass $10,000 in one transaction, in accordance with federal law. Such reporting helps prevent instances of tax evasion by customers; dealers are legally obliged to file such an 8300 form as required under federal law.
At the point of sale, physical gold must be subject to sales tax in your state of residency; however, your capital gains tax liability doesn’t become due immediately upon selling it. With a 1031 exchange, however, this liability can be delayed by investing the proceeds in another property such as more gold without incurring additional taxes.