If silver coins and bullion are part of your investment portfolio, selling them may incur capital gains taxes when sold. Before undertaking any large-scale transactions involving precious metals it’s wise to consult a tax professional experienced with precious metals transactions for advice.
The IRS mandates that dealers of physical precious metals use Form 1099-K to report any profits earned from sales using this method, to help minimize tax evasion.
Taxes on long-term gains
Silver and other precious metals are considered capital assets under US tax law, meaning investors may incur capital gains taxes when selling their investments. Capital gains taxes are calculated by subtracting the selling price from its original purchase price – also referred to as its cost basis; including any fees and commissions related to buying your silver in the first place.
The Internal Revenue Service imposes a maximum long-term capital gains tax rate of 28% for long-term investment profits. While this figure is higher than ordinary income taxes which usually range between 0% to 20% for most people, most don’t pay more than 28% in taxes on their profits from investment investments.
When selling coins or bullion for profit, you must report this transaction to the IRS using their relevant forms. Furthermore, it’s essential that you determine your cost basis as this will allow you to calculate profits more accurately; any losses from other collectibles can also offset these profits.
Taxes on short-term gains
Precious metal dealers must report any profits earned from selling coins and bullion to the IRS as capital gains taxes, which differ from regular income taxes by being calculated using the difference between purchase price and selling price of each metal product sold. This tax serves two functions – it generates revenue for government as well as making sure individuals who gain wealth through investments contribute a proportionate amount back into society.
To assess your tax liability, begin by calculating the cost basis of your silver investments. This should include both their original price as well as any associated expenses such as commissions or fees associated with their purchase; also factoring in any adjustments such as shipping or insurance costs that might have altered them from what was originally planned.
Long-term gains are subject to a maximum capital gain tax rate of 28%; short-term gains, on the other hand, may incur ordinary income tax rates that can be much higher than this limit.
Taxes on wash sales
If you sell precious metals at a lower price than originally purchased, any profits won’t be subject to taxation if sold at a loss; rather, this loss can be used against other capital gains in that year and carried forward for use against capital gains in subsequent years. It is highly advised to consult a tax professional prior to undertaking such transactions.
The IRS requires market participants to report any profits earned when selling physical bullion and precious metal coins, in order to prevent tax evasion. Most dealers provide customers with a 1099-B form in order to document these sales; however, due to privacy issues some may prefer not doing this.
Investors can significantly lower their capital gains tax liability by purchasing VAT-exempt gold and CGT-free British legal tender coins, or even precious metals eligible for IRA investment accounts. It’s advisable to seek professional tax advice prior to selling precious metals as this can help avoid making mistakes that cost time and money in taxes.
Taxes on private sales
Although precious metals are often seen as safe long-term investments, their expenses can quickly add up when factoring in commissions, fees, sales tax and capital gains taxes. When selling silver it’s wise to consult a professional tax adviser as each state may impose differing laws and rates.
Hold your silver for more than one year and the profits from selling are considered long-term capital gains and taxed at a lower rate than standard income. Your cost basis can also help reduce how much tax is owed upon selling.
However, you should be aware of IRS requirements requiring dealers to report transactions involving precious metals worth more than $10,000 cash transactions in order to combat money laundering and other illicit activities. While this might not directly apply to you if selling to a dealer directly, if in doubt about what to do it’s best to consult your tax adviser or professional for guidance.
