For maximum deductions and reduced tax liabilities, seek advice from an experienced certified tax professional familiar with precious metals investing. This will ensure compliance with reporting requirements as well as accurate documentation of expenses.
Physical gold investments like coins and bars are considered collectibles by the IRS, thus subject to a maximum 28% capital gains rate. Exchange-traded funds investing in mining companies may qualify for the lower 15% rate.
Taxes on Capital Gains
Capital gains taxes are assessed on profits realized from selling investment assets such as stocks, bonds, digital assets such as cryptocurrencies and NFTs, collectables such as coins and jewelry and real estate. Tax rates on such assets depend on your filing status and duration of ownership – in most cases you’ll pay your ordinary income tax rate when reporting them as gains.
Investment losses can help offset capital gains and decrease the amount of taxes you owe. According to IRS regulations, you are allowed to deduct up to $3,000 of capital losses each year from regular income; any excess losses can be carried forward to future years.
Holding assets for at least one year before selling can help minimize capital gains taxes, and qualify for lower tax rates – up to 15% for most investors and 3.8% net investment income tax (NIIT). Neither tax applies to retirement accounts such as IRAs and 401(k) plans.
Taxes on Losses
Under current tax law, investment losses can be offset against capital gains within one year of realization – this process is known as loss harvesting – to help minimize taxes that would otherwise be higher than necessary, particularly among investors in high marginal tax brackets.
IRS categorizes gains and losses as either long-term or short-term depending on how long an investor holds onto each security or asset. Short-term gains are subject to ordinary income tax rates while long-term ones qualify for preferential capital gains tax rates.
Realized investment losses may be deducted from gross income in the year that they are incurred provided they do not exceed $3,000 ($1,500 for married taxpayers filing separately). Unrealized losses may also be carried forward and used against future gains to a maximum limit of $3,000 each tax year; however, wash sales rules or other technical constraints limit how much of them can be deducted.
Taxes on Investments
Investors have several strategies available to them in order to reduce their tax liabilities. One is through tax-advantaged investments such as those offered in a 401(k), traditional or Roth IRA that allow tax-deferred returns. Furthermore, investors can often reduce tax liabilities by timing market sales of assets such as selling before or after one year mark can switch it from short-term capital gain treatment to long-term capital gain status.
An alternative way of lowering your tax bill is through investment losses, which can be deducted up to $3,000 annually from any taxable profit. Furthermore, many investors can deduct property taxes on investment properties. Investors should also be mindful of other taxes such as state sales and excise taxes; additionally high-income earners may be subject to NIIT which imposes an extra 3.8% surtax on investments above certain thresholds.
Taxes on Exchange-Traded Funds
Tax treatments of ETFs and ETNs depend on factors including type of investment, individual investor circumstances and account type in which it is held. Please be aware that any information provided herein should not be seen as investment advice from SSGA as we do not provide investment, legal or tax advice services.
Gains realized from selling ETF shares at a profit are taxed as short term capital gains, and are subject to ordinary income tax rates of up to 28%. Losses on investments held within taxable brokerage accounts may be offset against other capital losses or deducted against up to $3,000 of ordinary income, with any unused losses carried forward into future tax years.
Commodity ETFs that invest in physical precious metals are subject to different tax treatment than other ETFs. At least once annually, commodity ETFs must mark to market all outstanding futures contracts and any realized gains are passed along to investors under the 60/40 rule, who then pay taxes according to this scheme.
