Yes, you should generally report gold transactions to the IRS. However, tax obligations on the sale of precious metals such as gold and silver do not expire the moment they are sold. Instead, sales of physical gold or silver must be reported on Schedule D of Form 1040 on your next tax return. This is the case not only for gold coins and ingots, but also for most ETFs (exchange-traded funds), which are subject to a 28% tax.
Many investors, including financial advisors, have trouble owning these investments. They assume, incorrectly, that since the gold ETF is traded like a stock, it will also be taxed as a stock, which is subject to a long-term capital gains rate of 15 or 20%. Investors often perceive the high costs of owning gold as profit margins and storage fees for physical gold, or management fees and trading costs of gold funds. In reality, taxes can represent a significant cost of owning 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 Sprott Physical Bullion Trusts investors can offer more favorable tax treatment than comparable ETFs. Because trusts are based in Canada and are classified as Passive Foreign Investment Companies (PFIC), U.S. UU.
Non-corporate investors are eligible for standard long-term capital gains rates by selling or repaying their shares. Again, these rates are 15% or 20%, depending on revenue, for units held for more than a year at the time of sale. While no investor likes to fill out additional tax forms, the tax savings of owning gold through one of Sprott's physical bullion trusts and participating in annual elections can be worthwhile. For more information on Sprott physical ingot trusts, ask your financial advisor or Sprott representative for more information.
Royal Bank Plaza, South Tower 200 Bay Street Suite 2600 Toronto, Ontario M5J 2J1 Canada. They assume, incorrectly, that since gold ETFs trade like a stock, they will also be taxed like a stock, which is subject to a long-term capital gains rate of 15 or 20%. The IRS taxes capital gains on gold the same way it does on any other investment asset. However, if you have purchased physical gold, you are likely to owe a higher tax rate of 28% as an object of collection.
Avoid investing in physical metal and you can minimize your capital gains taxes at the normal long-term capital gains rate. And when possible, keep your gold investments for at least a year before selling them to avoid higher tax rates. Long-term earnings on bullion are taxed at their ordinary income tax rate, up to a maximum rate of 28%. Short-term earnings on bullion, like other investments, are taxed as ordinary income.
An asset must be held for more than one year for gains or losses to be long-term. The IRS classifies precious metals, including gold, as collectibles, such as works of art and antiques. This applies to gold coins and ingots, although their value depends solely on the metal content and not on rarity or artistic merit. You pay taxes on selling gold only if you make a profit.
However, long-term gains on collectible items are subject to a 28 percent tax rate, rather than the 15 percent rate that applies to most investments. These pieces include, among others, gold coins with fractional denominations; American Eagle gold or silver coins; any foreign currency that was not explicitly mentioned in the IRS's list of reportable items, as well as pieces of U.S. currency that were created after the list was created in the 1980s. For example, VanEck Merk Gold (OUNZ) owns gold ingots and stores them in vaults, but allows investors to exchange their shares for ingots or bullion coins.
And since gold is an investment asset, when you sell your gold and make a profit, it's taxed as capital gains. This means that when a gold ETF sells part of the gold you own, you make short or long term gains or losses. Gold is often taxed differently than other investments, and tax rules vary depending on the way you choose to invest in gold. .