By:  Jeff Clark

There’s lots of conflicting and inaccurate tax information surrounding this subject.  So, what’s the real skinny on the current tax rules for selling precious metals & ETF’s in the U.S.

The IRS considers gold a “collectible” and will tax your realized capital gains at a 28% rate. This includes all forms of gold (other than jewelry), such as…

• All denominations of gold bullion coins and numismatic/rare coins, gold bars, etc.

• ETFs like GLD, SLV, etc. (closed-end funds have different rules, too complex to cover here)

• Any electronic form of gold such as James Turk’s excellent GoldMoney product, Bullion Vault, etc.

• Any “paper” or certificate forms of gold, such as Perth Mint Certificates and EverBank accounts

• All forms of pool gold, rounds, and commemorative coins, etc.

The same designation and rules apply to silver, platinum, and palladium.

“Reporting” requirements can be confusing.  It is true that precious metals dealers are exempted from reporting certain small sales and other sales to the IRS – but that doesn’t relieve you of your obligation.

If you sold a single gold or silver coin to a dealer, he is not obligated under current regulation to report the sale. However, selling at a profit requires you to report it and pay 28% tax on your gain.  Hence, you must maintain records of your basis.  The dealer is not required to do so.

Bear in mind that the Patriot Act, the Bank Secrecy Act and other anti-money laundering provisions obligates a dealer to report any “suspicious customer activity” and file a “Suspicious Activity Report” (SARS).  Therefore, don’t expect your dealer to do a “work-around” in helping you avoid reporting your sale. There are people sitting in prison who’ve tried this.

Gold stocks  (mining stocks) are not designated as a collectible and are therefore subject to the standard capital gains tax rates like all other stocks.  Rates are set to rise to 20% if the Bush tax cuts sunset.

Gold jewelry sales are not reportable.

The Industry Council for Tangible Assets (ICTA) is the lobbying arm of your industry. Their website contains valuable information on this topic.  Certain larger sales and certain non-exempt coins and bullion items require a dealer to file IRS documents.  Consult your dealer, or see the ICTA website for more information.

This information pertains to U.S. taxpayers only and is not intended as nor should be considered personal tax advice. Always consult a financial planner and/or tax professional before investing.

On September 22, 2010   /   General Market, Gold, Silver  
3 Comments
  1. dennis jacobs
    6:04 pm on November 12, 2012

    If taxation on physical gold upon selling is 28% that dampens interest in buying for me. What are the alternatives?

    • Fisher Precious Metals
      9:09 pm on December 9, 2012

      Gold and Silver bullion (as well as numismatics, platinum and palladium) are considered by the IRS to be collectibles and taxed at 28%. This is not unlike a valuable oil painting which would also be taxed at 28%.

      When it comes to bullion items, this interpretation is very unfortunate. The commonly held interpretation of the term “bullion” is any precious metal item that sells for a premium of less than 15% over the spot price. This would then include virtually all bars and most of the commonly traded, high volume coins. These bullion items trade much more like a money surrogate than they do as any sort of a “collectible”. Thus, they should be taxed more like a CD or Money Market than a collectible. Unfortunate, but that’s the way it is.

      Therefore, any long-term capital gains are subject to a maximum federal income tax rate of 28%, instead of the usual 15% maximum rate on long-term gains. Note: the key here is “maximum”.

      How does the 28% work? If you are in the 28%, 33%, or 35% federal income tax bracket, your long-term gains from collectibles are taxed at 28%. If you are in the 0%, 10%, 15%, or 25% bracket, your long-term gains from collectibles are taxed at your regular rate of 0%, 10%, 15%, or 25%. That’s dampens the tax blow on your gold and silver sales if you fall in a lower bracket.

      So, does that make the holding of physical precious metals unattractive? On the contrary! Show me one other asset class that is poised to return the gains yet expected from the metals? I would rather pay 28% (or less) on a gain than take a capital loss on the alternatives, most of which appear poised to under-perform.

      And, physical ownership vs. ETF’s etc.? Depending on their structure, the ETF’s are also taxed as collectibles (check your prospectus). Personally, I prefer the physical over the paper unless held in a short-term trading account or a 401-k (if you have IRA assets, consider opening a Precious Metals IRA that allows you to hold physical metals).

      Finally, I would suggest that it is much more important to hold that investment in which you really believe than be deterred by the tax treatment. I would rather pay 28% on something than 0% on nothing, let alone a loss.

      John Fisher