Are Gold and Silver Coins Taxable?
Investment in precious metals is an attractive proposition for those looking for stability and value in uncertain markets. Bullion coins provide a simple means of purchasing precious metals derived from their metal content; their worth lies solely within this elemental value.
However, some individuals are surprised to learn they cannot sell their bullion coins tax-free; this decision depends on several factors including state and local sales taxes.
Capital Gains Tax
Gold and silver coins offer investors alternatives to stocks and bonds, yet must also be handled carefully when it comes to taxes. The IRS classifies precious metals as collectibles with a maximum capital gains tax rate of 28%.
Profits from gold and silver investments sold within one year will be taxed as ordinary income at rates higher than long-term capital gains taxes. Cost basis reductions such as dealer premiums or storage fees may help offset some of these potential tax implications when selling your bullion.
State laws regarding sales tax on precious metals vary significantly, with some states exempting them altogether and others applying a small percentage tax to specific types of bullion such as American Gold Eagles or IRA-approved bars and rounds. Some legislators have introduced sound money bills aimed at repealing sales taxes entirely for investment-grade bullion.
Sales Tax
At present, sales tax on precious metals varies based on state and city laws; New York currently levies an up to 9% sales tax rate.
Some states do not levy sales taxes on gold and silver coins, which makes the investment even more appealing as this reduces costs while increasing your potential ROI.
Most buyers of precious metals make small investments over time as part of a long-term savings plan, investing incrementally over time as part of an accumulated diversified savings strategy. Applying sales taxes may penalize this approach to saving and instead encourage more risky methods of saving.
Congressman Alex Mooney (R-WV) has introduced sound money legislation designed to remove sales taxes on physical gold and silver bullion and coins. The Monetary Metals Tax Neutrality Act, supported by both Sound Money Defense League and Money Metals Exchange, would also exempt precious metals from capital gains calculations and other federal income calculations, earning numerous original cosponsors.
Value Added Tax (VAT)
Physical precious metals differ from other investments in that they don’t enjoy tax-deferred status and must be reported to the IRS when sold. Capital gains taxes may reach 28 percent due to IRS classification of these coins as collectibles; those selling their precious metals held for less than one year will pay ordinary income rates when selling.
To calculate your capital gain, subtract the cost of purchasing and holding coins from their sales price, including any appraisal, storage and insurance fees that were paid out.
Congressman Alex Mooney (R-WV) and sound money advocates are working on legislation that would exempt gold and silver coin sales from federal income taxation. The Monetary Metals Tax Neutrality Act – co-sponsored by Gold Standard Institute, Sound Money Defense League and Money Metals Exchange – would treat precious metal sales such as bullion as nontaxable transactions.
Gift Tax
Physical precious metals can serve as valuable heirlooms passed from generation to generation and provide a reliable hedge against economic uncertainty. When gifting these coins however, specific tax considerations must be considered and it’s wise to consult a financial advisor or legal professional regarding any potential tax implications of gifting physical gold within the United States.
IRS considers non-legal tender gold coins and bullion to be collectibles for tax purposes, meaning gains on these investments are taxed as long-term capital gains at rates up to 28%. Sound money activists have long protested this tax treatment of one of only two metals listed as legal tender in the Constitution: gold.
Gold and silver coins passed down as inheritance do not incur capital gains tax, but their cost basis counts towards the annual gift exclusion limit of $17,000 per recipient, providing significant tax savings. If held for at least a year before selling them off, inheritance gold may even qualify for discounted capital gains rates.
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