The Internal Revenue Service (IRS) classifies gold and other precious metals as collectibles that are taxed at a long-term capital gain rate of 28%. Gains on most other assets held for more than one year are subject to long-term capital gain rates of 15% or 20%. This is the case not only for gold coins and bars, but also for most ETFs (exchange-traded funds) that pay a 28% tax. Many investors, including financial advisors, have difficulty owning these investments because they incorrectly assume that because the gold ETF is trading as a stock, it will also be taxed as a share, which is subject to the long-term capital gain rate of 15% or 20%.
Investors often perceive the high costs of owning gold as the trader's profit margins and storage fees for physical gold, or the management fees and trading costs of gold funds. In reality, taxes can represent a significant cost to the possession of gold and other precious metals. Fortunately, there is a relatively easy way to minimize the tax implications of owning gold and other precious metals. Individual investors can take advantage of Sprott Physical Bullion Trusts, which offer more favorable tax treatment than comparable ETFs.
Because trusts are domiciled in Canada and are classified as Passive Foreign Investment Companies (PFICS), non-corporate investors in the United States are eligible for standard long-term capital gain rates for the sale or redemption of their holdings. Again, these rates are 15% or 20%, depending on revenue, for units held for more than one year at the time of sale. Making the annual elections to own gold through one of Sprott's Physical Bullion Trusts can be worthwhile in terms of tax savings. To learn more about these trusts, ask your financial advisor or Sprott representative for more information.
The IRS considers gold to be a collector's item similar to works of art or antiques and is taxed in the same way. Yes, you should generally report gold transactions to the IRS. However, tax liabilities for the sale of precious metals such as gold and silver are not paid at the time they are sold. Instead, physical gold or silver sales must be reported on Schedule D of Form 1040 on your next tax return.
Precious metals are exempt from sales tax in many states, however, each state within the U. S. Department of State has its own rules and regulations when it comes to collecting sales tax on precious metals. You only pay taxes when you sell your gold in cash, not when you buy more gold with that money.
These taxes must be levied on any currency that contains gold or silver but is not recognized as a medium of exchange for the payment of debts and taxes; any coin or bar made of platinum, palladium or copper; any ingot product made of gold or silver if such bars are not stamped or printed with their weight and purity, accessories and processed items. In other words, gold coins are taxable based on their total value, rather than just weighing how much gold they are made of.