According to Sprott.com, 2020 was a banner year for gold bullion, with an impressive gain in value of just over 25 percent. While gold prices have since leveled off, it’s still a precious metal that can add significant value to your investment portfolio. This brings us to the topic of whether or not you have to pay tax on gold bullion, which is typically in the form of bars, ingots, or gold coins. Scottsdale collectors who aren’t sure about whether they have to pay tax on their bullion should keep reading to find out what they need to know.
Gold Is Considered a “Collectable” by the IRS
The Internal Revenue Service puts gold into the “collectables” category. This means gold bullion is normally taxed at long-term capital gains rates. However, filers in 2021 didn’t have to pay capital gains tax if their taxable income was $40,400 or less, according to Bankrate.com. If this same stipulation applies in the future, whether or not you pay tax on gold bullion at the current long-term capital gains tax rate will depend on your taxable income. If it’s over the income limit, you would pay tax on your bullion at the short- or long-term capital gains tax rate that applies for the applicable tax year.
Short-Term Capital Gains Differ from Long-Term Capital Gains
If you sell your gold bullion during the same year you purchased it for more than you bought it for, short-term capital gains taxes may apply. This refers to assets you’ve had for less than a year. Tax rates for short-term capital gains are the same as what you would pay on income from work. The reason long-term capital gains taxes often apply to gold bullion is because it’s more common for investors to hold on to physical gold. This is often the case during times of economic uncertainty. Long-term capital gains apply to assets you’ve had for more than a year. Depending on your income, related taxes could be nothing, 15 percent, or 20 percent.
Several Tax Considerations Are Taken into Account
As with most things involving taxes and the IRS, there are many rules and guidelines that apply. With capital gains taxes on gold bullion, the following factors are considered:
• How long you’ve owned your gold bullion
• Costs related to owning this asset
• Your tax bracket
• Your gold investment strategy with physical gold
• Your marital status*
*If you get divorced, how much tax you may owe on gold bullion will depend on whether or not it was jointly purchased and/or sold.
You Can Minimize the Tax Impact of Owning Gold
According to Forbes.com, one way to ease the potential tax burden associated with gold bullion is with a gold trust. Depending on how the trust is set up, you may be able to pay lower long-term capital gains rates. Another option to consider is a self-directed Roth retirement account. With this type of account, you’re able to trade an unlimited amount of gold without having to pay tax. However, there are some rules that apply with self-directed accounts. For instance, you’re not permitted to lend money from the account to yourself, relatives, or friends. A 1031 IRS exchange can also be used to postpone taxes on gold.
If you’re interested in buying gold bullion or you’re looking for the best place to sell gold in Scottsdale, make sure to work with trustworthy precious metal dealers who offer high-quality service and have years of experience. Call on the industry-leading professionals at First National Bullion when you’re ready to buy or sell precious metals, including gold, silver, platinum, and palladium. Give us a call today at 480-546-5089.
The statements made in this blog are opinions, and past performance is not indicative of future returns. Precious metals, like all investments, carry risk. Precious metals and coins may appreciate, depreciate, or stay the same in cash value depending on a variety of factors. First National Bullion does not guarantee, and its website and employees make no representation, that any metals for sale will appreciate sufficiently to earn the customers a profit. The decision to buy, sell, or borrow precious metals and which precious metals to purchase, borrow, or sell are made at the customer’s sole discretion.