Do You Have to Report Gold to the IRS?
Reporting gold purchases and sales to the IRS depends on several factors, such as what kind of gold you buy and sell, its purchase cost and profit earned. This article will give an overview of these considerations.
The IRS mandates that precious metal dealers file Form 1099-B when their customers sell any precious metals listed on its Reportable Items List.
Taxes on Capital Gains
Taxable capital gains result from selling assets such as stocks, businesses, real estate or precious metals for a profit, including shares of stock, businesses and properties as well as precious metals. They represent the difference between their selling price and cost basis – calculated as purchase price plus commissions, taxes and any associated costs related to owning and maintaining an asset – calculated at its selling price and cost basis of an asset’s cost basis calculation.
Long-term capital gains realized by taxpayers may be taxed at a lower rate than their ordinary income depending on both his income and how long he held onto an asset for. Investors in the lowest tax bracket may pay no capital gains tax at all, while high-income taxpayers could save as much as 17% by holding onto profitable investments for at least a year.
Realized capital losses may offset both long- and short-term gains, up to an annual limit of $3,000; any unutilized losses carry forward into future years until used up. Furthermore, in certain circumstances (such as selling your primary residence), these losses may even be exempt from federal income taxation.
Precious metal dealers and brokers in the US are required by law to submit certain transaction reports to the Internal Revenue Service when certain criteria are met, in an effort to combat instances of money laundering from both dealer and customer standpoints.
Coin dealers need to undertake some additional in-house work when customers pay with cash that exceeds a threshold dollar amount that triggers reporting requirements. Luckily, the definition of cash includes traveler’s checks, bank drafts and even foreign-denominated physical currency as forms of payment; wire transfers, personal checks or money market withdrawals do not qualify as cash payments.
Dealers are required to report when customers sell large quantities of specific coins quickly in an effort to prevent money laundering, with the government having the right to investigate any dealer that fails to report as required – however this has nothing to do with capital gains taxes.
Typically, the IRS only taxes your gold sales when it yields a profit – typically, this would mean its selling price minus its original cost to you.
Precious metal dealers are legally required to report sales of certain bullion pieces to the IRS through Form 1099-B. This obligation extends both to sales that fall within current anti-money laundering laws as well as transactions involving large sums of cash payment.
Gold, silver and palladium investments such as coins, bars and jewelry may present exceptions to this general rule. Precious metals are considered collectibles and taxed at the same 28% long-term capital gains rate as most other investment assets; paying with bankier’s checks doesn’t count as cash for tax reporting purposes so these purchases wouldn’t be subject to taxation either; dealers are only required to report sales of precious metals purchased with more than $10,000 cash sales as required by state legislation.
Customers selling physical gold for profit must report it to the IRS; however, taxes owed are calculated not upon sale but at filing time.
Investors typically purchase precious metals through retirement accounts or self-directed IRAs or SEP-IRAs, which enable postponing taxes until funds are withdrawn from these accounts.
Contrary to popular belief, there is no way around taxes when selling precious metals. If you invest in physical quantities of gold or funds that own physical gold directly, your capital gains rate is 28%. To reduce their capital gains rate and avoid higher rates altogether, investors seeking lower taxation should look for ETFs and mutual funds which do not buy physical gold; you could even use 1031 exchange methods like purchasing more precious metals with proceeds of sales using 1031 exchange method instead of selling.
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