A Quick Guide to Taxes on Precious Metals

A Quick Guide to Taxes on Precious Metals
A common question from people who invest in precious metals is whether or not they’ll have to pay taxes when they sell on their bullion at a profit. There are federal rules, as well as state tax laws, so whether you’re buying gold bars or silver coins from this website you’ll need to talk to an accountant or tax expert to make sure you’re on the right side of federal and state law.
Precious metals are deemed to be capital assets
This means that silver, gold, platinum and palladium are capital assets so they may attract capital gains. As the IRS sees precious metals as collectibles, they may be levied at up to the maximum of 28% capital gains tax (CGT).
These taxes won’t be assessed until the metals are actually sold. If you, for example, buy 20oz of gold at $1,000 per ounce and while it’s in its depository it appreciates to $1,200 per ounce, then the capital gain hasn’t been realized. If you sell it the next week for $1,200 per ounce, then the capital gain has been realized.

Will I owe tax on this profit?
To work this out, you need to look at the original cost of the metal. The original purchase cost $20,000 and the gold sells at $24,000 – a profit of $4,000. Depending on your federal tax bracket you may owe no or some tax on this profit. There are also special conditions.
If you inherit the gold
If you inherit precious metals then there’s a different method used to calculate the cost basis. The cost basis is the market value of the metal on the day your benefactor died.
If someone gifts the metals to you
In this case, the cost basis is calculated from the market value on the day the metals were bought by the person giving them to you. If this market value is less than the amount the person actually paid the cost basis is derived from a fair market value on the day they gave them to you.
So, to sum up, if you sell your metals and make a profit, you’ll probably have a tax liability on the profit.
What are the rates I might pay?
As the IRS sees precious metals as collectibles, you may have to pay a higher capital gains tax rate. The maximum is 28%, but not everyone will have to pay this rate as the individual rate is determined by the length of time the person held the metals and their ordinary income tax rate. In addition, the person has to determine whether their capital gain is long or  short-term, as short-term gains are taxed differently.

When do I have to pay the taxes?
You’ll report the capital gains from your metals sales in your annual tax return and then pay the taxes in due course.
I’ve sold some metals at a loss; what now?
Then there’s no capital gain. You actually have a capital loss which you may be able to use to offset other capital gains in the same tax year or in future tax years. You can also use this loss against your ordinary income, with some limitations. In these situations, you should talk to your tax professional for expert, up-to-date advice.


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