New investors often become confused as they attempt to understand which gold coins are tax free, yet this confusion can easily be dispelled with some basic knowledge about how precious metals are taxed.
American Eagle coins that are legal tender for their face value, such as American Eagles, are exempt from sales taxes. However, if you sell collectible coins you should expect to pay capital gains taxes at rates up to 28% of profits.
Capital Gains Tax
Capital gains tax (CGT) is a tax levied on any gain made when selling investment assets such as second homes, stocks and businesses; it may also apply to physical gold investments like coins and bars.
The IRS classifies gold coins as collectibles for tax purposes and profits realized from investing in these investments are subject to tax at 28% of realized profit. This rule applies equally to both numismatic and bullion versions such as American Gold Eagle.
Maintaining accurate records of your gold coin purchases and sales to accurately calculate your profit is vitally important, which a CPA can assist with. They’ll also be able to help determine whether your investment in gold was wise. Many precious metals dealers require you to report any profits on a 1099-B form for taxes purposes – keeping records can help avoid paying unnecessary tax fees!
Sales Tax
Purchases of coins, bars or accessories made out of precious metals may be subject to sales tax depending on both your state of residence and where the seller resides. New York requires sellers to collect sales tax for purchases made within its borders that ship directly to an address within New York state.
Gold coins classified as legal tender are exempt from sales tax. Investors should keep records of their coin transactions and costs basis in order to calculate any potential taxes that might be owed when selling them.
Gold and silver coins are classified as collectibles for tax purposes, with any profits from their sale taxed at a collector rate of 28%, similar to art, stamps, antiques or jewelry. This differs from investments like stocks or bonds which usually incur capital gains rates between 15%-20% if held less than one year; investors who wish to invest in precious metals should consult a tax professional first for guidance.
Inheritance Tax
When inheriting precious metals such as coins and bullion, including gold coins and bullion, inheritance taxes may apply. Usually based on cash value rather than its numismatic or historic worth, to ascertain this figure it’s essential that they be professionally appraised by an appraiser such as Scottsdale Bullion & Coin to establish what should be their estimated cash value.
Gold coins do not qualify for capital gains tax if held for over one year before selling; however, profits made when selling are taxable and should be recognized at their regular tax rates. For most investors this should not pose too many problems.
1099-B
Profits made from selling precious metals in the US are taxed as capital gains, including coins that you purchase and sell as well as those passed down from friends and family. This taxation doesn’t depend on how long you own them but instead on their initial “cost basis,” which is when they were first purchased.
Your cost basis includes dealer markups, storage fees and any other costs incurred while owning coins. In accordance with IRS regulations, any capital losses can be subtracted from your overall gain when selling them.
The IRS mandates that dealers of physical gold and silver file Form 1099-B after every sale they make of physical precious metals like gold and silver, to help monitor large transactions accurately report them. There are some exceptions; such as inheriting or gifting gold does not incur capital gains taxes and gifts up to $17,000 can be given without incurring gift tax liabilities.
