Can You Claim Gold on Your Taxes When Selling Precious Metals?
Legally, selling precious metals does incur taxes; however, sound financial planning can help minimize your tax liabilities.
Like other collectibles, gold is subject to capital gains tax at a maximum rate of 28%. This higher tax rate than investments such as stocks, mutual funds and ETFs significantly diminishes after-tax returns from gold investments.
The tax code has been designed to encourage long-term investments by offering preferential tax rates for assets held for over one year, giving owners of these investments time to realize their growth potential without being subject to capital gains taxes every time they sell a portion. Furthermore, certain long-term investments may even be protected from capital gains taxes by investing through tax-advantaged accounts such as 401(k)s and traditional or solo IRAs.
Others, such as fine art or real estate investments, can be more challenging to assess in terms of value growth; thus it’s essential that any realized capital gains and losses be reported on tax returns – this process involves filling out Form 8949: Sales and Other Dispositions of Capital Assets before transferring that information onto Schedule D of your return.
Capital losses can reduce your taxes in the year of their incurrence by offsetting ordinary income with losses incurred, which reduces taxes you owe for that year. Capital gains and losses can be divided into two time-based categories, short term if held less than a year, and long term if held over more than a year. According to TurboTax, short-term losses should first offset short-term gains before using long-term ones against any long-term gains you’ve generated; any excess losses left unutilized can carry forward for future years’ tax bills!
Keep in mind that wash-sale rules do not apply to cryptocurrency investments as they are not regulated as securities; thus, you could potentially sell coins with declining values and then immediately buy them back at their original prices, incurring a loss even though you still possess them. Therefore, it is imperative to consult a tax professional prior to investing in any cryptocurrencies.
Some dealers may be wary about broaching IRS Form 8300 reporting with customers as the conversation may devolve into a structuring conversation, and disclosing that their information will be used for Form 8300 filing could damage business relations.
Items who regularly itemize their deductions but whose total itemized deductions fall below $24,000 may see significant tax advantages by consolidating charitable donations, investment interest expenses, medical expenses and mortgage interest payments into one year.
If you sell precious metal coin or bullion at a profit, the Internal Revenue Service treats this transaction as “capital gains.” Your profits may be taxed at either short-term capital gains rates or long-term capital gains rates depending on how long it was held before sale.
However, you can avoid this burdensome tax bill by taking advantage of write-offs on the sale of gold and silver coins and bullion. By using your original cost as your cost basis (minus any selling expenses), claiming write-offs on these sales could reduce taxable income by as much as 28%.
If you are an individual investor, considering purchasing gold through one of Sprott Physical Bullion Trusts can save significant taxes in comparison with other forms of ownership. As these trusts are domiciled in Canada and not subject to U.S. 3.8% net investment income tax rates of 3.8% net investment income tax for U.S. investors; they qualify for standard long-term capital gains rates of 15%-20% depending on your income level, potentially saving thousands in taxes versus traditional forms.
Categorised in: Blog