When I Sell Gold Do I Report It to the IRS?
Gold sellers who make a profit must report it as capital gains on their tax returns, with profits taxed as their current Fair Market Value (FMV) less the purchase cost.
Dealers of precious metals must report sales of certain amounts to the IRS using Form 1099-B forms; requirements vary based on what coins or bullion is being sold.
Capital Gains Tax
Gold is an asset valued by investors as an investment opportunity, but any gain generated through selling precious metals to third parties is considered taxable income by the IRS.
Physical gold investments such as bullion bars and coins, as well as jewelry classified as investment grade, are classified by the IRS as collectibles and are subject to an extra capital gains tax rate of 28%; this rate is significantly higher than either 15% long-term capital gains tax rates for long-term or 20% short-term gains investments that apply more typically.
Capital gains tax liability depends on the original cost basis for items sold, which is calculated as their current fair market value minus their original purchase price at purchase time. When dealing with inherited or gifted gold items, receipts may be needed in order to establish this cost basis; alternatively an income tax-registered appraiser could provide this service if receipts cannot be produced.
Dealer Reporting Requirements
The federal government requires precious metal dealers to report certain sales of bullion to the IRS through Form 1099B, such as sales made using actual cash, money orders, traveler’s checks or cashier’s checks – this requirement does not cover personal checks, wire transfers or debit cards used by our clients to purchase bullion.
Reporting requirements extend beyond bars and rounds to coin purchases that exceed certain thresholds, such as one oz Gold Maple Leaf coins, Krugerrand coins and Mexican Onza coins as well as all 90% silver US coins purchased over certain thresholds.
These restrictions require additional paperwork and compliance with federal regulations; we strongly suggest consulting with a tax professional regarding your individual situation. Despite these obstacles, there are many methods of selling precious metals anonymously through dealers ranging from person-to-person transactions up to larger aggregators like Bullion Exchanges.
Individual Reporting Requirements
There may be instances in which dealers are legally obliged to disclose purchases of gold; these cases typically relate to payment type rather than actual metal being purchased.
Coin dealers that receive payment in cash exceeding $10,000 or two or more cash instruments (money orders, cashier’s checks or personal checks) that together exceed that threshold are required by IRS Form 8300 to file disclosure reports similar to what banks use as part of Know Your Customer regulations to prevent money laundering.
Unscrupulous dealers use the threat of “reporting” to raise investor fears and sell overpriced coins to unsuspecting buyers. Therefore, it’s crucial that you select a reliable dealer and make sound overall tax planning decisions regarding your precious metal investments if you hope to minimize capital gains tax liability when the time comes for selling bullion pieces.
Reporting to the IRS
Rarely, precious metal dealers must report purchases of gold to the IRS. However, if customers pay with cash of $10K or more they must disclose it as “cash reporting transaction.” This policy allows government bodies to keep an eye on major commodity exchanges in our nation.
Upon receiving bullion products as gifts or inheritances, their fair market value (FMV) becomes your cost basis and capital gains taxes apply when selling them at more than this value.
Sometimes the best way to avoid paying capital gains tax on bullion investments is to make purchases or trades directly between individuals. Doing this requires finding an anonymous buyer willing to conduct business with you – however there is the risk that banks could close accounts should they suspect that this attempt at circumvention of reporting requirements by the government was indeed unsuccessful.
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