How Do I Report the Sale of Gold on My Tax Return?
Precious metals such as gold coins and bullion bars are considered collectibles by the IRS, so when selling such items you may need to report your profit.
Calculating your tax basis involves including all of the original costs you paid as well as sales taxes and shipping fees in your annual tax return.
Capital Gains Tax
As is typically required of gold and silver sales, taxes do not become due immediately upon their making; rather, gains or losses related to precious metal sales must be reported on your tax return when filing at the end of each year.
Gain or loss is calculated as current fair market value minus original cost basis for an item, with capital gains subject to your individual tax bracket – in the case of precious metal coins sold, however, long term capital gains rates usually range between 15%-20% of your tax liability.
Your gold or silver dealer must file Form 1099-B with the IRS if your purchase exceeds $10k in value to report cash transactions for money laundering and illegal activity. Some states also impose sales taxes; it is important to check local laws to see if you must pay these in addition.
Ordinary Income Tax
If you purchased gold coins as investments, the IRS requires that any profits earned be reported on your tax return. This amount could differ depending on whether they were sold for hobby income, business income or ordinary income purposes.
No matter how you invest in precious metals, gains on gold are subject to ordinary rates if sold within one year of purchase; otherwise they qualify for long term capital gains tax rates which typically range between 15%-20%.
Buying precious metals through a dealer usually results in you receiving a 1099-B form to report any sales to the IRS, however only certain items qualify for reporting; such as any US coins composed of at least 90% silver; gold coins with face values exceeding $1,000 and 25 or more 1-ounce Gold Maple Leaf, Krugerrand or Mexican Onza coins are all considered reportable items.
Gold investors have experienced great gains through investing in precious metals in recent years, yet also experienced great market volatility. Therefore, it’s vitally important that investors understand how the IRS treats sales of gold and the tax implications associated with such sales.
The IRS classifies precious metals like gold bullion bars and coins as collectibles, similar to art or antiques. Therefore, gains you make from investing in gold are subject to up to 28% capital gains tax depending on their holding period and income level.
Taxes on gold sales cannot be avoided entirely; however, you can reduce your tax bill with smart overall planning and by investing in physical precious metals trusts like Sprott Physical Bullion Trusts which provide significant tax savings by enabling investors to invest without needing to report it with the IRS.
Precious metals are considered collectibles by the IRS and therefore could be subject to a maximum gains rate of 28%. Gains are calculated by comparing your sale price with your original cost basis – either when purchasing or inheriting it – which can be determined from any original receipt.
Selling precious metals like gold coins requires using their original fair market value at the time of purchase as the cost basis, although you may add costs such as shipping or sales tax as additional expenses. Capital gains on gold don’t become payable immediately upon sale but are rather calculated during annual tax filings.
When selling gold coins, the IRS requires you to file Form 1099-B when selling any that fall under their list of reportable items, which include US 90% silver dimes with face values greater than $1000 ($1000 face value), 1 oz Gold Maple Leaf or Gold Krugerrand coins and any gold bullion pieces over 25 ounces in weight.
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