When I Sell Gold Do I Report It to the IRS?
Most dealers understand their customers want the details of their precious metal transactions not reported to the IRS; however, in certain circumstances this reporting requirement must be fulfilled.
This article will outline when and how you must report sales of gold, and how you can minimize tax liability with proper planning.
Taxes on Capital Gains
Gold investment profits are taxed as capital gains, which differs from regular income taxes in their treatment. The tax rate on investment profits equals their marginal tax bracket up to 28 percent maximum.
Precious metal investments are a popular means of protection from economic uncertainty. Gold’s value often increases with time, making it an investment with long-term potential. When purchasing and selling gold, however, one should always take taxation considerations into account.
Federal law mandates that precious metal dealers report cash payments exceeding $10,000 to help the IRS monitor large commodity exchanges and detect possible instances of money laundering.
Physical gold and silver are classified by the IRS as investment assets, meaning any profits from selling these precious metals as investments will be taxed at up to 28 percent long-term capital gains tax rate. If purchased as collectibles rather than investments, however, you could benefit from an even lower maximum tax rate of 28%.
Reporting capital gains requires including profits from selling gold and silver coins or bars as part of one’s yearly tax return. Unlike with some investments, taxes due on these precious metal sales do not become due immediately and must be filed using Schedule D of Form 1040. Depending on what kind of precious metal was sold, Form 1099-B may also need to be submitted with each sale to the IRS.
The IRS considers physical gold and other precious metals collectibles similar to art or antiques. As a result, any profits on investments consisting of these precious metals are taxed at a maximum long-term capital gains tax rate of 28% more than many other forms of investment income.
In order to prevent instances of tax evasion, the Internal Revenue Service requires all dealers selling gold items such as US currency, money orders and bank or certified checks to report all profits they generate from sales transactions.
Precious metal dealers generally are not required to file reports with the IRS upon selling gold; however, any transaction where more than $10,000 cash changed hands must be reported through Form 8300 for government tracking and money laundering prevention purposes.
Customer sales of certain coins and bullion pieces to dealers that exceed certain quantities must be reported using the 1099-B series, also used for other income such as stocks and real estate investment trusts. Examples of such sales would be 1 oz Gold Maple Leaf Coins; 1-oz Gold Krugerrand Coins; and 1 oz Gold Mexican Onza Coins as well as any US coin composed of 90% silver or greater.
Gold and silver investments sold into an IRA account are exempt from taxes, so investors should consult an accountant/attorney in order to maximize their tax position before making investment decisions.
Taxes on Collectibles
Taxing collectibles differs significantly from taxes on traditional investments in that the IRS views precious metals more as art, stamps or antiques than as traditional investments – meaning any gains on these assets sold for sale are taxed at up to 28% rather than at 15%-20% as is usual for long-term capital gains on other investment assets.
Tax liabilities on precious metal investments depend on each investor’s cost basis – usually equal to initial purchase price – plus costs like appraisal fees that could help lower taxable liability.
Physical gold and silver coins, rounds, or bars held for over one year before they are sold at a profit may qualify for lower long-term capital gains rates of 15%-20% depending on an individual’s income bracket. This also applies to gold held by mutual funds or exchange-traded funds as well as direct purchases of bullion from dealers.