Tax effects of selling physical gold or silver stocks of these metals, regardless of their form, such as investment coins, investment bars, rare coins, or bars, are subject to capital gains tax. Capital gains tax is only due after the sale of such investments and if the investments have been held for more than one year. As an investor, you should note that capital gains are taxed at a different, much lower rate than earned income. This is known as capital gains tax.
And since gold is a fixed asset, it is taxed as a capital gain when you sell your gold and make a profit. However, depending on how you held your gold, you’ll either have to pay taxes at the normal capital gains rate or at a general rate of 28%. This applies not only to gold coins and bars, but also to most ETFs (Exchange Traded Funds), which are taxed at 28%. Many investors, including financial advisors, have problems owning these investments.
They mistakenly assume that because the gold ETF is traded like a stock, it is also taxed like a stock that has the long-term capital gains rate of 15 or 20%. Investors often perceive the high costs of owning gold as dealer premiums and storage fees for physical gold or as management fees and trading costs for gold funds. In reality, taxes can be a significant cost factor for owning gold and other precious metals. Thankfully, there’s a relatively easy way to minimize the tax impact of owning gold and other precious metals.
Individual investors may offer Sprott Physical Bullion Trusts a more favorable tax treatment than comparable ETFs. Since the trusts are based in Canada and are classified as Passive Foreign Investment Companies (PFIC), US private investors are entitled to the usual long-term capital gains rates when selling or redeeming their shares. Again, depending on income, these rates are 15 or 20% for units that were held for more than a year at the time of sale.
While no investor likes to fill out additional tax forms, the tax savings resulting from owning gold through one of the Sprott Physical Bullion Trusts and holding the annual elections may well be worthwhile. To learn more about Sprott Physical Bullion 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. In general, you must make this new investment within 45 days of selling the old investment.
It must be a similarly situated plant. So if you sell gold, you would have to reinvest the profits in precious metals. And you must have the money managed by an intermediary, because once the capital gains reach your bank account, they become taxable. Stocks of precious metals such as gold, silver or platinum are considered capital assets, which is why capital gains may arise. When it comes to tax purposes, the IRS classifies precious metals as collectibles, which is why they may be taxable at the maximum taxable capital gains rate of 28 percent.
The Internal Revenue Service (IRS) classifies gold and other precious metals as collectibles, which are taxed at a long-term capital gains rate of 28%. And if possible, keep your gold investments for at least a year before selling them to avoid higher income tax rates. If you’ve invested in gold and sold it for a profit, you’re probably looking for ways to minimize your taxes.
