Individuals selling precious metals must report any profits earned as capital gains tax to the Internal Revenue Service.
Fair Market Value (FMV) of Your Gold for Tax Purposes When selling gold later on, its FMV serves as your cost basis and will be used as the starting point in calculating capital gains tax calculations.
Dealers
Individuals sometimes sell gold coins, jewelry and bullion to raise cash quickly for unexpected expenses such as medical bills or home repairs. Selling precious metals also serves to rebalance an investment portfolio – selling some of their gains can help rebalance investment portfolios more easily; any profit on selling gold should be taxed as capital gain.
Before entering into any deal with dealers, it’s crucial that thorough research be performed. Aim for dealers that quote fair prices without using high-pressure sales tactics; watch out for dealers trying to manipulate prices by employing industry jargon or making false claims about demand.
Avoid dealing with dealers that fail to report coin sales made by their customers to the IRS for tax reporting purposes, as the government mandates this for certain types of coins such as 90% silver US coins and 1 oz gold maple leaves, Kruggerands and Onza coins.
Brokers
Dealers and pawn shops must report gold sales to the IRS; however, there are ways of selling precious metals anonymously. Some dealers only report transactions when it contains pieces on the Reportable Items List or when selling more than $10,000 cash; however these rules aren’t universally followed.
There may also be ways of postponing your tax bill by investing the proceeds of a sale into another precious metal investment – something known as 1031 exchange. However, this requires purchasing similar asset within 45 days from when you made the original purchase.
When choosing a gold broker, look for an organization with clear and transparent pricing on their website, along with a user-friendly chat support feature if any questions arise. In addition, make sure they disclose any risks involved with investing in precious metals.
Individuals
Due to privacy or theft concerns, many individuals choose to buy and sell gold privately. It is possible if purchases and sales conform to current anti-money laundering laws.
The IRS mandates reporting of precious metal purchases and sales based on payment method, amount and timing. For instance, if a single purchase totaling $8,000 and then returning three hours later to make another $3,000 purchase are considered related transactions that meet reporting threshold. A Form 8300 report should then be filed.
Individuals selling gold at a profit must report and pay capital gains taxes at a 28% long-term capital gains rate, similar to most investment assets. If they sell it at a loss instead, however, they can deduct this expense when filing their taxes.
Taxpayers
The Internal Revenue Service recognizes gold and silver as capital assets, so any gains you realize when selling them are subject to taxation; the exact amount depends on your holding timeframe and income level.
To calculate your taxable capital gain, subtract your cost basis from the sales price. This represents the difference between initial purchase price and final selling price of precious metals, plus any transaction costs related to their sale or exchange.
Before selling gold, it’s essential to understand its tax repercussions. Failing to properly report profits can incur severe IRS penalties; some states charge sales tax while the IRS requires dealers of transactions exceeding $10,000 cash to file Form 1099-B with them.
