Holdings of these metals, regardless of their shape, such as bullion coins, ingot ingots, rare coins or ingots, are subject to capital gains tax. This is the case not only for gold coins and ingots, but also for most ETFs (exchange-traded funds), which are subject to taxes of 28%. 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. For individual investors, Sprott Physical Bullion Trusts may offer more favorable tax treatment than comparable ETFs.
Since trusts are based in Canada and are classified as passive foreign investment companies (PFIC), U.S. non-corporate investors are entitled to standard long-term capital gains rates by selling or repaying their units. 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 holding gold through one of the Sprott Physical Bullion Trusts and participating in the annual elections can be worth it.
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. Whether or not you must pay sales tax for a purchase of precious metals depends on your location. Some states require the collection of sales tax, while others do not.
Some states may also charge sales taxes to a certain extent, and there may be exemptions beyond that point. The IRS taxes capital gains on gold in 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 ordinary long-term capital gains rate.
And when possible, hold your gold investments for at least a year before selling them to avoid higher income tax rates. As mentioned earlier, the sale of precious metal coins, cartridges and ingots can serve as an additional source of income for many customers. Therefore, in the eyes of the IRS, any benefit that a customer obtains by selling their precious metal assets is considered taxable and is therefore subject to a form of tax. This tax is known as “capital gains tax”.
Therefore, “capital gains” refers to any benefit that results from the sale or exchange of shares or personal assets. In terms of precious metals, capital gains occur when a certain coin or piece of ingots increases in value and is then sold at that higher price. In conclusion, capital gains are one of the main parts of a large transaction report that the IRS seeks. And since gold is an investment asset, when you sell your gold and make a profit, it's taxed as capital gains.