Do You Pay Taxes When You Sell Gold?
Precious metals provide instant liquidity when it comes to investment opportunities such as stocks or real estate, making international diversification simpler while protecting from global instability risks.
The IRS treats gold bullion coins and bars as collectibles similar to art or antiques; thus, their profits are subject to up to 28% taxation on any profits realized.
Taxes on Capital Gains
As with all capital gains, selling gold carries with it tax ramifications that cannot be avoided; however, you can lower your tax bill with careful tax planning and investing for long-term gain.
Step one in determining your tax liability is to establish your cost basis – the original price that was paid for your physical metals – by multiplying per-ounce cost with total number of ounces owned.
When purchasing physical gold coins or bars at discounted prices, the discounted amount will also count toward your cost basis. Additionally, the IRS has set guidelines to define which precious metals must be reported as investment grade; such as coins minted post 1800 which have legal tender status in their country of origin and which typically sell for no more than 180% of their gold content; these rules do not include very old coins with obscure numismatic value and most bullion bars.
Taxes on Long-Term Gains
The IRS classifies precious metals like gold as capital assets, and any financial gain from selling these precious metals counts as taxable income. When considering physical coins and bars as examples of gold investments, taxable income is calculated by taking its sales price less its original cost basis – however this number could change depending on your type of investment and can substantially lower after-tax returns.
Not like many investments and real estate assets, gold sales do not need to be reported on a 1099-B form to the IRS; physical gold transactions instead tend to be reported when filing tax returns using Schedule D of Form 1040, giving investors access to typical short and long-term capital gains rates and providing them with tax planning opportunities to help reduce any tax liabilities related to gold ownership. Speak with a professional tax advisor for further advice.
Taxes on Short-Term Gains
If you purchase physical gold and sell it for more than its original cost, the IRS will seek their share of profits. Unlike many assets, precious metals like coins and bullion bars are considered collectibles by the IRS and taxed at a similar rate as art or antiques.
Short-term gains are calculated as the difference between current fair market value (FMV) and your original cost basis – typically the cost to purchase gold as well as costs related to acquisition, storage and maintenance.
Short-term gains from selling precious metals are subject to a 28% tax rate, higher than other net capital gains taxes of 15% for most taxpayers. However, investors who invest in physically-backed ETFs that hold large quantities of physical gold and track its price won’t be subject to as harsh a tax burden than those purchasing and selling individual coins or bullion themselves.
Taxes on Inheritance
A: Gold and precious metals are considered capital assets and any gains realized on their sale are taxable. The IRS classifies collectible precious metals as collectibles and taxes them at 28% long-term capital gains rate – higher than most investments.
Whether you inherit or receive precious metals as a gift, reporting requirements and cost basis calculations must be followed to calculate tax liability. The Internal Revenue Service will assess its value based on original purchase price plus how long you have owned it.
However, there are several strategies available to you that can help reduce your capital gains tax liability. These strategies include holding onto gold for more than a year before selling it; investing it through tax-advantaged accounts; offsetting gains with losses; and offsetting gains with capital losses. It would be wise to consult a financial advisor in order to discover more information regarding these approaches and whether they apply in your specific case.
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