Stocks of these metals, regardless of their shape, such as investment coins, precious bars, rare coins or bars, are subject to capital gains tax. Capital gains tax is only due after the sale of such investments and if the investments have been held for more than one year. Gold investors pay capital gains taxes when they make a profit. It’s important to know the tax effects on gold, as they differ from the tax considerations of traditional investments.
Taxes are additional expenses associated with investments. So the higher you pay taxes, the less profit is made. Gold is subject to a long-term capital gains tax rate of 28% by the IRS. This rate is higher than gains from other investments, such as stocks, which are held for more than one year and which are generally taxed at a rate of 20%.
Long-term gains from precious metals are taxed at your normal income tax rate, up to a maximum rate of 28%. Short-term gains from precious metals are taxed as ordinary income, just like other investments. An asset must be held for more than one year for gains or losses to be long-term. VanEck Merk Gold (OUNZ), for example, owns gold bars and stores them in vaults, but it allows investors to redeem their shares for gold bars or investment coins.
In addition, futures contracts are launched at the end of each calendar year, and taxes are calculated on paper gains and losses. Instead of investing in gold bars or futures, an investor can buy stocks in companies that mine and produce gold and possibly other metals. Futures are taxed in a very different way than other investments, and an owner of a futures ETF is taxed in the same way as if the owner held the individual futures contracts. And you must have the money managed by an intermediary, because once the capital gains reach your bank account, they become taxable.
If you’ve invested in gold and sold it for a profit, you’re probably looking for ways to minimize your taxes. This allows the IRS to determine whether sellers have properly reported this income on their tax returns. So if you sell your investment jewelry for a profit, the same maximum capital gains rate of 28% applies to precious metals and must be shown in your income tax return. The basic strategies for minimizing your tax bill on gold are discussed in more detail in the following sections.
Let’s break down three common strategies investors use to minimize capital gains taxes on gold. One of the many benefits of owning physical gold and silver is that they can be kept private and confidential. There is a lot of contradictory and inaccurate tax information on the Internet about taxes on gold and silver. If you bought gold as an investment and made a profit selling it, the IRS wants a piece of the pie.
A positive development in this area was the increasing adoption of state sales tax laws, which largely exempt gold and silver from taxation. While the law may say that you can sell gold and silver without paying taxes, that doesn’t mean that the IRS will put it into practice.
