Investing in precious metals can be a lucrative hobby, but be wary of potential tax ramifications to prevent unpleasant surprises.
Selling gold can incur capital gains tax; however, if your investment was held for longer than 12 months the tax rate will likely be reduced.
What triggers reporting?
As a general rule, the IRS considers any asset that you sell for more than its original purchase price a capital gains transaction and thus taxes them accordingly. This could apply to baseball cards, stocks, houses or even gold.
As gold bullion prices remain so high, customers often sell it off quickly to coin and precious metal dealers to turn a quick profit. In order to avoid fines or penalties from the IRS, coin and precious metal dealers must report any cash payments over $10,000 made directly to them by customers.
Though dealers must report sales that exceed their threshold reporting threshold for coins or bars sold to customers, not all customer transactions require reporting. The only exceptions include sales of any bullion pieces or coins mentioned by the IRS Reportable Items List such as 1 oz Gold Maple Leaf Coins, 1-oz Silver Mexican Onza Coins or 90% silver US coins which often sell in quantities of twenty-five or more.
What do I need to report?
As often happens with gifted or inherited precious metals, people sell them when their value has significantly increased since receiving it as a gift or inheritance. Any profit generated from selling should be reported in their annual tax filings as capital gains tax.
The IRS considers physical gold and silver to be collectibles, meaning any gains could be taxed at up to 28% maximum gain rate – similar to how financial investments such as futures contracts or mutual funds are taxed.
Coin dealers must report all sales of gold and silver bars that exceed certain quantity limits to the IRS using Form 1099B, such as sales to customers who pay with traveler’s checks, cashier’s checks or money orders; bank wires, credit or debit card transactions and ACH transfers do not count as cash payments and this data collection process aims at helping prevent tax evasion.
How do I report it?
As a precious metal investor, it’s vitally important that you understand the reporting requirements and tax implications associated with your investments. Gold dealers must report purchases made under certain circumstances such as when customers sell large quantities of a specific bullion piece or pay more than $10,000 cash; under these conditions they may need to file Form 1099-B with the IRS. Furthermore, careful tracking of investment purchases and sales helps accurately establish cost basis while accurately recording gains or losses in gains or losses.
As a general rule, profits from the sale or exchange of precious metals are taxed at the same rate as other income. However, certain rules specifically pertain to coin and precious metal collectibles, making it important for dealers and investors to understand these regulations to avoid fines, penalties, or criminal charges. For more information regarding precious metals investments consult a trusted tax professional who specializes in them.
What happens if I don’t report it?
Failing to report profits made from purchasing or selling gold and silver coins within the United States may result in fines or penalties from the IRS, who specifically target individuals selling these commodities to prevent instances of tax evasion.
Profits from most assets, including gold, are subject to long-term capital gains rates; however, due to IRS consideration of physical gold as collectible, its profits are taxed at up to 28% higher rates.
Also, any expenses incurred while purchasing and holding your coins such as storage fees or appraisals will be deducted from their selling price and reduced capital gains tax bill for you. American Gold Eagle coin sales don’t require reporting or incur this higher rate of capital gains tax; however if significant cash payments were involved then dealers must fill out an 8300 form to report this information to the IRS.
