How Do I Report the Sale of Gold on My Tax Return?
The IRS classifies precious metals like gold as collectibles, similar to art or antiques. Therefore, any financial gain realized from selling such precious metals must be taxed as capital gains.
Precious metal dealers are legally required to report sales of bullion pieces they sell on the IRS Reportable Items List, such as American Gold Eagles and 1-oz Gold Maple Leaves from American Mint as well as Krugerrands or Mexican Onza coins in quantities of 25 or more.
Taxes on Capital Gains
Gold coins and bullion bars sold for profit fall under a different tax category than traditional investments like stocks and bonds, according to the IRS. Accordingly, these precious metals are considered collectibles and subject to up to 28% in taxes upon being sold.
Financial investments such as stocks or ETFs tend to be taxed at a reduced rate if held for more than one year, but any gains from selling physical gold coins or bars is considered short-term capital gain and subject to ordinary income tax rates.
For gold that was received as inheritance or gift and is being sold, its fair market value will be determined as of 1 April 2001 (or its date of purchase by the transferor, if earlier). An income tax-registered valuer would need to conduct an evaluation to calculate tax liability. This helps avoid disputes between you and taxable person as well as lower your taxable amount.
Taxes on Losses
If you sell gold at a profit, any associated capital gains will be taxed as either short-term or long-term capital gains depending on how long you held onto the asset and your income level.
The IRS classifies gold and silver coins as collectibles, similar to art or antiques. As such, they are subject to higher taxation than other financial investments like stocks or real estate.
ICTA has issued reporting guidelines for dealers based on discussions they held with the IRS. These guidelines specify which precious metals require 1099-B filing; examples include pre-1965 US coins with face values exceeding $10,000 and sales of American Silver Eagles or privately minted bullion bars in quantities exceeding 1,000 troy ounces as well as other items.
To minimize your tax liabilities, when calculating your cost basis for gold and silver coins and bullion investments, use their original cost as this will ensure the lowest capital gains tax liability possible.
Taxes on Dealers
When selling precious metals for profit to dealers, the Internal Revenue Service requires filing Form 1099-B with them in order to monitor cash transactions over $10,000 and prevent money laundering or any illegal activities that could occur with these transactions. Furthermore, many states impose sales taxes on gold sales.
Gains on the sale of gold coins are subject to taxes at the same rate as other collectibles, including art, stamps and antiques – up to 28% in some instances. By comparison, gains from financial investments held for longer than one year are typically taxed at 15%-20%.
Dealers are required to file additional tax reports when selling gold and silver coins exceeding $1,000 face value of 90% silver US coin or 25 or more 1-oz Maple Leaf, Krugerrand or Mexican Onza coins with fineness greater than.9995 to the IRS.
Taxes on Individuals
Individuals that sell precious metal investments for a profit must report this transaction on their tax return, since capital gains are defined by the IRS as value accumulated due to changes in market forces that don’t require direct effort by an individual.
Some states impose sales taxes on gold purchases and sales, which can quickly add up depending on how often individuals buy and sell gold coins. However, smart tax planning strategies can help individuals limit the impact of this expense.
As part of its mandate to report profits on sales of precious metals, the government requires dealers who accept cash payments for bullion sales to submit information to the IRS on Form 1099-B. This rule covers coins and bars sold for more than $1,000 face value of U.S. 90% silver dimes and quarter or half dollars; 25 1-oz Gold Maple Leafs, Krugerrands or Mexican Onzas sold through cash purchases must also report this information.