First, you can defer your tax bill with a 1031 exchange.. That means reinvesting money from your gold sale by buying more gold, and if you meet IRS requirements, all of those transactions won’t be taxed.. The IRS does not treat gold as a particular asset class. This means that there are no specific rules for gold when it comes to capital gains taxes..
If you want to minimize your tax burden, the best way to do this is through intelligent overall tax planning. This is not only the case with gold coins and bars, but also with most ETFs (Exchange Traded Funds), which are taxed at 28%. Many investors, including financial advisors, are having trouble owning these investments. They mistakenly assume that because the gold ETF is traded like a stock, it is also taxed like a stock, which has the long-term capital gains rate of 15 or 20%..
Investors often perceive the high costs associated with owning gold as premiums and storage fees for physical gold, or as management fees and trading costs for gold funds. In reality, taxes can mean significant costs for owning gold and other precious metals.. Fortunately, there’s a relatively easy way to minimize the tax impact of owning gold and other precious metals.. Individual investors, Sprott Physical Bullion Trusts may offer more favorable tax treatment than comparable ETFs.
Because the trusts are based in Canada and are classified as Passive Foreign Investment Companies (PFIC), U, S. Investors who are not companies are entitled to standard long-term capital gains rates when selling or repaying their shares.. Again, depending on income, these rates are 15% or 20% for shares that were held for more than one year at the time of sale. No investor likes filling out additional tax forms, but the tax savings of owning gold by one of the Sprott Physical Bullion Trusts and holding annual elections can be worthwhile..
To find out 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. The best way to avoid this is to invest in funds and assets that don’t buy physical gold. A particularly good approach is to look for ETFs and investment funds that specify this approach when investing..
Assets such as futures contracts and options are not considered investments in physical assets, so the IRS treats them as normal capital gains at a rate of no more than 20%. According to the tax code, precious metals are a collector’s item. This means that it is not eligible for regular treatment of long-term capital gains. Instead, profits from gold bars held for more than one year are taxed at a maximum tax rate of 28%.
Precious metal gains held for a year or less are taxed as ordinary income. However, tax avoidance is completely legal. And precious metals investors can use a legal method to avoid paying sales tax on their precious metal purchases.. The IRS views gold sales as part of capital assets in the collectibles category..
As long as you own rare coins, bars, gold bars and coins, you are therefore subject to capital gains tax (CGT). The IRS classifies precious metals, including gold, as collectibles such as art and antiques. This applies to gold bars, coins and bars, although their value depends only on the metal content and not on rarity or artistic value.. You only pay taxes on selling gold when you make a profit.
However, a long-term profit from collectibles is subject to a tax rate of 28 percent instead of the 15 percent tax rate applicable to most investments. Under British law, gold states and Gold Britannia coins are tax-free as they are considered British legal currency. That means if a gold ETF sells some of the gold it holds, you have a short-term or long-term gain or loss. You can trade gold futures yourself or own an ETF that carries out the trade, such as PowerShares DB Gold Fund (DGL).
And since gold is a fixed asset, when you sell your gold and make a profit, gold is taxed as a capital gain.. This fund buys a number of gold futures contracts, which should have essentially the same return as a gold index that the fund is trying to replicate, although there are anomalies in the futures markets that could cause deviations.. The tax office applies the tax rules for gold coins, bars and bars, which are based on their value and not on the purity content of the gold metal.. Some gold funds hold physical gold bars, while others hold companies, futures contracts, and stocks of gold mining companies..
In addition, the gold in IRA must be pure, including Maple Leaf Gold, Mexican Onza coins, but not South African Krugerrands.