Gold investments are popular choices among those looking to diversify their portfolios, yet many individuals do not fully comprehend how taxes impact the decision to sell precious metals.
Precious metal dealers must file certain sales reports with the IRS in order to detect money laundering schemes and combat money laundering schemes.
Capital Gains Taxes
Gold coins can be an attractive investment option for some individuals; however, selling them for more than they paid can have significant tax repercussions that must be handled carefully. Your tax liability depends on several factors including what kind of gold coin was sold, its size, how long you held onto it prior to selling and your tax filing status.
The IRS considers gold coins collectibles, so they are subject to capital gains taxes as other valuables. If sold outside an IRA, capital gains taxes on profits made will reach 28% maximum; this also applies if inheriting gold coins from someone.
Though gold coin taxes cannot be avoided entirely, there are ways to minimize their effect. Working with a financial advisor may help minimize tax obligations by planning purchases and sales in such a way as to limit their tax implications.
Reporting to the IRS
When selling physical gold, the IRS requires reporting your transaction. This applies both if it was sold directly to an individual (such as in a pawn shop) as well as dealers that deal in precious metals, since such dealers must issue a 1099-B form when buying or selling your gold from you.
If you sell gold for more than what it cost you initially, your profits may be subject to capital gains taxes at your usual tax rate; this will depend on how much income you generate each year.
However, you may be able to avoid paying capital gains tax on your gold investment by holding onto it for over one year. This is possible because the IRS treats gold as a collectible, meaning you’ll only pay tax at a lower long-term capital gains rate of 28%. Just be sure to maintain records of any gold sales or purchases made and consult a tax professional if any questions arise about your specific circumstances.
Selling to an Individual
IRS guidelines indicate when precious metal transactions must be reported, and adhering to them is key in order to avoid fines or penalties from failing to report transactions properly. Before selling precious metals it would also be wise to consult a tax professional.
When selling gold coins for more than their cost basis, capital gains taxes will typically apply. If you hold on to them for longer than a year however, lower long-term capital gain rates may apply.
It’s best to work with an established and trustworthy dealer when selling gold coins, so find someone with strong professional associations and customer recommendations. Additionally, double box your coins using heavy-duty tape for better protection during transit and weigh and insure them if mailing your package directly – gold prices fluctuate frequently; so lock in their price before shipping.
Selling to a Business
Sell gold coins through a reputable business such as an online or local rare coin buyer or precious metals dealer for maximum profit. Such services typically offer higher prices than coin shops or pawnshops and may offer the ability to lock in a selling price before sending the gold back.
Notably, even if you sell gold coins to a business, you remain responsible for paying taxes. According to IRS requirements, all sales of assets (including coins ) and profits must be reported and subject to capital gains taxes.
As part of your due diligence, always select a dealer with excellent credentials who is reputable and qualified to buy your gold. When selling rare coins to dealers, only deal with ones certified in gold grading and authentication by an independent organization – this way you will avoid getting taken advantage of or paying unnecessary taxes.
