Collectibles are seen as an alternative investment by the IRS, and the tax rates and figures associated with them are very different from standard rates. The capital gains tax on your net profit from the sale of a collector's item is 28%. Depending on your adjusted gross income, you may also be subject to a net investment income tax of 3.8%. Long-term capital gains on many types of assets are usually taxed at 15% or 20%, but capital gains on collectible goods are taxed at 28%.
If you sell a collectible that you have held for a year or less, the tax rate will normally be the same as your ordinary income tax rate. Uncle Sam taxes almost all assets sold, and collectibles are no exception. In fact, they are currently subject to one of the highest federal tax rates on investment property. Do you have a collection that you want to sell? If so, the IRS can determine that your collection is comprised of “collectibles” and apply a 28% capital gains tax rate to any gain you may acquire from the sale of your collection.
In general, for most taxpayers, the capital gains tax rate is 15%. However, tax law prohibits deductible expenses and similar exchanges in collectibles. It is important to understand the tax implications of selling collectibles before doing so. Knowing how much you will owe in taxes can help you make an informed decision about whether or not to sell your collection.
It is also important to keep accurate records of your purchases and sales in order to accurately calculate your capital gains.
