Can You Claim Gold on Your Taxes?
Gold coins can be an attractive form of investment for many people. But when sold, any profits earned are subject to tax by the Internal Revenue Service (IRS).
Taxes due on physical precious metal investments depend on both profit earned and length of ownership. According to IRS rules, precious metal collectibles have a maximum tax rate of 28%.
Collectibles
Precious metals offer alternative investment solutions, yet their tax implications must be handled appropriately. Therefore, it’s wise to consult a tax professional who understands all the unique factors associated with gold investments before making your decisions.
When selling physical gold coins within one year of buying them, any profits are classified as short-term capital gains and subject to your individual tax rate depending on income and filing status. By holding onto them longer, any profits may be taxed as long-term capital gains at rates between 0%-15%-22% depending on your tax bracket.
If you inherit gold coins as inheritance or receive them as gifts, your cost basis will equal their fair market value as of their previous owner’s death date. Therefore, these coins won’t be subject to capital gains tax; however, any capital losses from other collectibles might help offset potential gains on gold and silver purchases.
Long-Term Capital Gains
When it comes to investing, the IRS does not treat all profits in equal fashion. Your tax rate on asset sales varies based on what type of asset was sold, how long you owned it for and your tax bracket. Capital gains and losses generally can be used offsetting other income sources such as salaries; however there may be exceptions – for this reason it is recommended consulting a financial professional prior to buying or selling assets stored in tax-advantaged accounts such as 401(k), traditional or individual retirement accounts (IRA) and SEP IRAs.
Profits derived from short-term assets, like stocks and real estate sales, are subject to ordinary income tax rates ranging from 10%-37%. Long-term capital gains, however, are taxed at lower rates–ranging from as low as 0% for investors in lower tax brackets; collectible gains like antiques, art, stamps are subject to up to 28% taxes while other types may be taxed either up to 20% or at your ordinary-income tax rates depending upon filing status and taxable income.
Short-Term Capital Gains
Uncle Sam wants his share when you make a profit on an investment or property, a process known as capital gains taxation that’s taxed differently depending on the asset type and length of ownership.
Short-term capital gains, those owned for one year or less and sold within that year, are subject to ordinary income tax rates of 37% or even higher. Conversely, long-term investments held for more than one year qualify for preferential rates that range from zero percent (0%-20%).
Keep in mind, too, that you must pay state taxes if applicable and high-income earners may owe an additional 3.8% net investment income tax – something which can quickly add up if your investments produce significant returns. But capital losses can help offset short and long-term gains to reduce overall tax bills – this makes for a smart approach!
Write-Offs
Profits earned from selling gold coins are generally considered capital gains and taxed at ordinary long-term capital gains rates of 0%, 15% or 20% depending on your income level and filing status. Furthermore, this agency allows you to claim capital losses that reduce your total tax liability.
The IRS mandates that dealers of precious metals file a 1099-B form with them in order to report any proceeds received from customers and prevent evasion by keeping tabs on anyone trying to skirt paying their due share of taxes. This allows the agency to monitor individuals who might attempt to avoid contributing their share by not filing 1099s-B forms with them.
If you want to reduce your tax liabilities, investing in assets that don’t purchase physical gold such as ETFs and mutual funds could be the key. Consult a financial advisor first so your investments are structured as efficiently as possible for tax efficiency.
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