Yes, it is generally necessary to report gold transactions to the IRS. However, tax obligations for the sale of precious metals such as gold and silver do not expire the moment they are sold. Instead, sales of physical gold or silver must be reported on Schedule D of Form 1040 of your next tax return. 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.
As explained in the “Reportable Purchases” section, purchases of precious metals are not declared unless the cash reporting thresholds are exceeded. Physical gold or silver holds are subject to a capital gains tax equal to their marginal tax rate, up to a maximum of 28%. To declare a transaction with gold coins, two forms are used, Annex D of Form 1040 and Form 8949, which must accompany the tax return. Reportable sales (again, customer sales to dealers) apply to 1-ounce Gold Maple Leafs, 1-ounce Krugerrands and 1-ounce Mexican ounce in quantities of twenty-five or more in a single transaction.
The International Council on Tangible Assets (ICTA) has published guidelines according to which precious metals transactions must be reported to the IRS based on negotiations with the IRS. Under certain circumstances, the dealer must file a Form 1099-B to the IRS to declare profits paid to a non-corporate seller of precious metals. Other precious metal products are declarable, but are not included here because the average investor does not trade them. The IRS considers that any profit a customer obtains by selling their precious metal assets is taxable and subject to capital gains taxes.
Don't finance your precious metals IRA with fractionated gold or silver, as they are also unnecessarily expensive. If gold coins are held as an investment, meaning that you don't trade them regularly and keep them for possible appreciation in value, they are considered a capital asset. This means that people who fall into the 33, 35 and 39.6% tax brackets only have to pay 28% for their physical sales of precious metals. One of the many advantages of owning physical gold and silver is that they can be private and confidential.
The Internal Revenue Service (IRS) classifies gold and other precious metals as collectibles that are taxed at a long-term capital gains rate of 28%. When reporting any of the transactions mentioned above, there are specific forms that precious metals traders must complete. .