The IRS considers gold and other precious metals collectables, meaning any profits from selling them may be subject to up to 28% long-term capital gains tax when sold for profit. There are ways, however, you can mitigate your tax bill when trading these precious metals.
One approach to investing in gold bullion would be through an exchange-traded fund or ETF that owns physical quantities of bullion instead of purchasing actual metal bars directly.
Taxes on Capital Gains
When selling a capital asset, any profits over its cost basis must be taxed. To determine your cost basis, start with what you paid for the asset including commissions and fees; subtract its sale price to determine any gain or loss; the IRS categorizes these gains or losses as either long term or short term depending on how long they were held – short-term gains are taxed at ordinary income rates while long-term ones get preferential tax treatment with preferential tax rates applied accordingly.
If your earnings exceed certain thresholds, an additional net investment income tax of 3.8 percent applies based on both long-term and short-term gains accumulated, calculated using your modified adjusted gross income.
Hold your assets in a tax-advantaged account such as a traditional or Roth IRA to avoid capital gains taxes; however, these accounts require withdrawal by age 59 1/2 to avoid incurring taxes and penalties.
Taxes on Losses
As part of your 2022 tax planning and preparation, it’s crucial that you understand how capital losses impact your taxes. Capital gains and losses are divided into two time-based categories – short term and long term losses can only be deducted if they belong to the same type of investment, so for instance, losses on stocks sold just before closing could only be deducted against gains that occured that same day (such as washing sale rules do not apply due to being unregulated securities). These wash sale rules do not apply when dealing with cryptocurrency trading either!
Taxes on Inheritance
Americans who inherit assets such as cash, securities, real estate, trusts or annuities may owe taxes. The exact amount depends on their state of residency, their relationship to the deceased person who died and how valuable their estate is.
Usually, spouses and their children are exempt from inheritance taxes; however, non-spouse heirs such as direct descendants or siblings could incur inheritance taxes of up to 15 percent.
Although many states have now eliminated inheritance taxes, Iowa, Kentucky, Nebraska, New Jersey and Pennsylvania still charge them; Iowa plans on gradually eliminating its inheritance tax by increasing its threshold and decreasing the top rate until it is completely gone by 2025.
Taxes on Investments
Investments can be an excellent way to build wealth, but they can also leave you facing unexpected tax bills if you don’t understand when and how the IRS taxes your investments. Most often, taxation on investments occurs when they’re sold for a profit; however, other situations may apply as well. Municipal bonds offer tax-free interest payments for high-income taxpayers while IRA investments grow tax deferred until retirement age when they’re subject to ordinary income tax rates; for other forms of investments it is wise to consult a financial advisor regarding specific details on this matter.