Do Gold Buyers Report to the IRS?
Many individuals buy gold coins to store their wealth and protect themselves against an ever-depreciating dollar, and want to know whether they must report these purchases to the IRS.
Yes, but this will depend on several variables including: amount purchased; payment method chosen and timeline in which it was bought.
Capital Gains
Gold can provide a safe haven during times of economic unrest, and investing in it may provide long-term gains in value. Investors must however be careful as profits from investing may trigger Capital Gains Tax (CGT).
CGT (Capital Gains Tax) is a federal tax on profits earned from selling certain assets such as jewellery, coins and bars that exceeds certain thresholds.
Dealers selling physical gold or silver must file Form 1099-B with the IRS when selling coins worth $1,000 face value of US 90% silver dimes, quarters, half dollars or 25 or more 1-ounce Krugerrand, Maple Leaf or Mexican Gold Onza coins due to IRS regulations which consider such commodities regulated commodities, with their tax rate set at 28%; by contrast gold ETFs (ETFs) which resemble physical metal are taxed at ordinary long-term capital gains rates of 20%.
Depreciation
Depreciation is a tax deduction that reduces your realized gain when selling assets such as gold coins or precious metal ETFs, such as ETFs. Depreciation differs from capital gains in that its recognition and taxation occur over a longer period. [1] Depreciation rules vary by country and type of asset and set out how its useful life should be measured when assigning financial reporting values for reporting purposes.
Tangible assets typically have an inherent lifespan and their value decreases over time through wear and tear, obsolescence and other factors. Accounting standards do not allow companies to depreciate them all at once when purchased; rather they depreciate over a set amount of time called their useful life in order to reduce reported income, and consequently pay taxes on less realized gains when sold off later.
Cash Payments
When purchasing gold from an accredited gold coin or bullion dealer with cashier’s check of more than $10k in physical gold, the dealer is required to file an IRS form 1099-B to document this sale as it helps detect large transactions and detect money laundering in the U.S.
When it comes to popular bullion products like Krugerrands and Maple Leaves, there are reporting specifications that must be fulfilled for every transaction to be reported on. These reporting specifications cover a 24-hour window; therefore avoiding these rules can be challenging.
Pawn shops and “cash for gold” operations typically don’t abide by such stringent reporting guidelines, allowing them to offer far less than their fair market value for your items. Unfortunately, this often results in them earning poor reviews online; however, you may still find reliable dealers by reading online reviews and searching accreditation lists.
Taxes
Customers purchasing or inheriting gold may need to pay taxes upon selling it back; typically based on its fair market value.
Depending on how long the asset was held and their individual income tax bracket, investors will owe capital gains tax when selling it at a higher FMV than its original purchase price.
On the other hand, if an investor sells gold at a lower FMV than their original purchase price, they will incur a capital loss. Capital losses can either be used against any gains experienced during that year, or they could carry forward and apply toward future capital gain transactions; depending on your individual circumstances it’s wise to consult a CPA or tax specialist for more details.
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