Does Physical Gold Attract Wealth Tax?

Does physical gold attract wealth tax

Gold has long been valued as a store of value and global currency. Although physical gold may seem appealing, its downsides include theft risk and higher tax rates when classified as collectible.

Investors can reduce these expenses by purchasing Sovereign Gold Bonds (SGBs) or gold ETFs, and increasing after-tax returns by placing it in an Individual Retirement Account (IRA).

Costs involved

Gold can be an excellent addition to your investment portfolio, holding its value even during market turmoil and providing diversification against riskier investments. But you must be mindful of its costs, such as taxes and markups; smart overall tax planning or investing in exchange-traded funds backed by physical gold may help minimize these expenses.

Physical gold ownership incurs storage and insurance expenses that will diminish your after-tax returns. One way to avoid them is storing it at a bank safety deposit box or vault; however, this option could expose you to theft risks.

When selling gold, the IRS will calculate your capital gains using its cost basis – this number can be found by consulting either your receipt or invoice.


Gold is considered a precious metal by the IRS, so gains from physical investments of it are taxed differently than other investment assets. Short-term capital gains on gold investments are subject to your ordinary income rate while long-term gains on it may incur up to 28% taxation rates, potentially decreasing overall after-tax returns.

Physical gold ownership comes with costs beyond storage and insurance charges, such as theft risk. Gold jewellery does not share this risk and falls into an IPM classification that exempts it from Goods and Services Tax (GST).

Gold mutual funds or ETFs typically offer higher pre-tax returns than physical coins or bullion, though their tax rates of 28% could reduce after-tax returns significantly. With careful planning, you could potentially avoid this tax burden by opting for gold that receives long-term capital gain treatment or investing through an IRA account.

Long-term capital gain

Gold investments are a wise addition to any portfolio, as they hold their value more reliably during economic turmoil than stocks and can hedge against inflation risk. Unfortunately, when sold they may incur capital gains tax that ranges from 10% for single filers up to 37% for those filing jointly taxpayers – to avoid paying this tax it would be prudent for investors to hold onto these holdings for at least one year prior to selling them off.

Physical gold investments come with various costs that can significantly lower after-tax returns, including storage fees, dealer markups and transaction costs. Gains from physical gold investments may also be taxed as collectibles which carry a maximum 28% tax rate as opposed to 15% long-term capital gain (LTCG) rates that apply to other investments – investing instead in an ETF or mutual fund may provide more favorable tax treatment.

Short-term capital gain

Investing in physical gold or bullion-backed ETFs may subject you to taxes due to IRS classification as collectibles; as a result, capital gains taxes applied at 28% rather than the more typical 15% long-term capital gain rate may apply for your profits from this investment.

Taxes on physical gold and other precious metals may come as an unpleasant shock, particularly with their recent price surge. But there are ways to lower your tax bill and improve after-tax returns: one option could be investing in a gold IRA.

Investors should carefully compare annual costs and fees across various gold investments options, including coins, mutual funds and futures ETFs. Any expenses that reduce after-tax returns should also be taken into consideration before making their final choice. Furthermore, be mindful of storage and maintenance fees when making this important decision.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

Categorised in: