Taxes are mandatory financial charges imposed on taxpayers by governments to generate revenue for funding infrastructure, military spending, education and other public expenditures. Most countries use government agencies like IRS or HMRC (HM Revenue & Customs in UK ) to collect taxes.
Sales Tax
Physical gold coins may offer investors tax relief; however, this approach also can increase storage costs. Furthermore, some states impose sales taxes on precious metal purchases.
Cities and counties often impose additional taxes when selling precious metals purchases, which can drastically increase their total cost.
Physical gold and silver are generally treated as collectibles, so any profits on their sale will generally be taxed at the same rate as ordinary income. But physical sales of gold and silver can sometimes trigger capital gains tax; for instance if you sell an original 1983 British Pound composed of nickel and brass for more than its face value in U.S. currency then that transaction would likely trigger it.
Capital Gains Tax
Many investors understand that precious metal dealers must report any profit they make when selling, but many are unaware that the sale of coins and currency can also incur capital gains tax. Dealers must report these sales on Form 8300 with details regarding both sale details as well as information on paying customers. Paper currency that does not legally tender of either a United States nation nor foreign nation sold at face value as well as Krugerrands and gold ingots sold for face value are subject to capital gains tax while monetized bullion such as coins, bars or wafers is exempt from wholesaling/retail business & Occupation taxes while retail sales tax applies on retail sales taxes but not retail sales tax.
Gains from physical bullion investments held over one year are considered ordinary income with a maximum tax rate of 28%. Investors can reduce their tax liability by diversifying into assets other than physical bullion investments such as exchange-traded funds. A financial advisor can assist investors in optimizing strategies for minimizing capital gains taxes.
Reporting Requirements
Federal regulations mandate that precious metal dealers report specific sales made to customers. This requirement was originally created by the Treasury Department during the 1980s to monitor large commodity exchanges within the U.S. and prevent money laundering schemes.
Current reporting requirements involve minimum purchase size requirements and fineness restrictions that can be somewhat complex; some bullion products do not qualify for reporting under these guidelines, such as one hundred 10 ounce silver bars being sold without needing to submit Form 1099-B forms, while thirty 5 oz gold rounds would require submission.
Some coins and bullion pieces also require special reporting requirements, for instance a gold Krugerrand sold at face value in U.S. dollars is subject to taxes even though it is legal tender in South Africa; when sold this way, dealers must fill out IRS Form 8300.
Alternatives
Gold coins are popular investments due to their ability to preserve wealth and provide protection from economic uncertainties. They’re easily available both online and at brick-and-mortar stores, with sizes ranging from one ounce up to 10 ounces available for purchase. But owning precious metals comes with some tradeoffs: dealer markups and storage fees when purchasing physical gold, management and trading fees when investing through gold funds, among others.
One way to sidestep these charges is investing in a fund that owns physical gold bullion on your behalf; however, this comes with its own set of complications – including a maximum capital gains tax rate of 28%.
Also an alternative is purchasing gold bars minted by trusted manufacturers, which tend to be easier for storage and transport, yet don’t provide as many benefits compared with coins. Furthermore, their maximum capital gains rate may reach 28% while offering lower markups and storage costs than coins.
