When I Sell Gold Do I Report It to the IRS?
Physical gold and silver are considered capital assets by the IRS and taxed at a reduced rate compared to regular income. However, precious metal dealers are legally obliged to report sales when customers sell large quantities of certain bullion pieces or pay more than $10,000 cash.
Capital Gains Tax
No matter the form in which you purchase precious metals – whether coins, bars or jewelry – when selling at a profit you will typically owe capital gains tax. The exact amount is determined by calculating your cost basis which was your original expense when buying them and your marginal tax rate which may range anywhere from 0%-28%.
Precious metals like gold are considered collectibles by the IRS, which means higher tax rates than traditional financial investments. Because of this, physical precious metals often sell for maximum capital gains tax rates of 28% when sold.
However, should you experience a loss when selling gold, this loss can be used to offset any future gains you might make. To make sure you have all of the information required for reporting accurately upon sale of your coin dealer is helpful in providing all forms and ensuring accurate reporting of sales.
Sales Tax
When it comes to purchasing gold, no reporting requirements apply to you with regard to the IRS. But once you sell and make a profit from selling it back into circulation, that must be reported; capital gains taxes must then be applied on this amount as with any financial investment.
Example: If you purchased gold coins or bullion online with cash payments, this transaction would need to be reported. But if instead paid using bank wire transfer, money order, traveler’s check, or cashier’s check it would not need to be reported.
Similarly, if you purchase more than $10,000 of precious metals from any one dealer, that dealer must file Form 8300 with the IRS to report large cash transactions and combat money laundering and other illegal activities. In addition to any capital gains taxes you owe when selling it back.
Inheritance Tax
Precious metal dealers are legally required to report customers who sell gold in certain quantities to them, helping the IRS prevent tax evasion. Dealers who fail to adhere to IRS guidelines risk fines or even jail time if they do not report these sales properly.
Inherited gold should be treated similarly to purchased gold; however, its cost basis (original cost) must first be established through receipts or documentation. In most cases, its origin can be traced back to either its parent or relative from whom it was received.
Inheritance tax does not apply to sales of precious metal jewelry; however, reporting rules still apply. At present, bars and coins must meet similar reporting rules. According to law, any sales of American Eagle, Kruggerand or Mexican Onza gold coins exceeding face value and any 90% silver US coin over face value that exceed face value must be reported under inheritance tax as collectibles subject to 28% capital gains rates like art, stamps or antiques are reported accordingly.
Other Taxes
No matter if gold comes through inheritance or purchase as an investment, if its sale exceeds your original cost basis it is subject to capital gains taxation. One way of mitigating or avoiding these taxes would be holding onto precious metals for at least a year before selling them off.
Bullion dealers must report sales of physical precious metals to the IRS when the quantity sold exceeds certain thresholds, such as selling 25 or more 1-oz Gold Maple Leaves, Krugerrands or Mexican Onzas; it also applies to any fractional ounce gold coins regardless of face value and other criteria.
An effective strategy to evade capital gains tax on gold investments and others is by conducting a 1031 exchange, which postpones your tax liability by investing the proceeds from their sale into another like-kind asset such as more gold.
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