When you’re buying or selling precious metals, it’s essential to understand the associated tax implications. This is a unique type of investment that’s subject to some complex tax rules. Unfortunately, failing to properly report your activities to the IRS can result in hefty penalty fees. Below are the answers to some of the most common questions on tax reporting for gold and silver transactions.
What to Know About Reporting Your Precious Metals for Tax Purposes
Can I sell precious metals without paying taxes?
The IRS categorizes precious metals as a collectible asset. This means any profit made from selling gold or silver is considered taxable income. Sellers must pay capital gains tax, which is determined by how long the asset has been owned. Items held for less than a year are taxed as short-term capital gains, whereas those held for more than a year are taxed as long-term capital gains at a maximum rate of 28%.
However, if precious metals are sold at a loss, it will offset any capital gains occurring in the same tax year.
How much can I purchase without reporting it to the IRS?
There are no government regulations requiring precious metals buyers to report their purchases over a certain amount. Although, it should be noted that dealers have an obligation to report any cash transaction of $10,000 or more. This is filed on Form 8300 and must include the customer’s name, address, driver’s license number, and social security number. Reporting large transactions is meant to help the IRS prevent fraud.
How are taxes calculated on gold and silver investments?
The tax liability on a precious metals investment will depend on a few different factors, including if the holding was short or long term, how much profit was made, and what the seller’s normal tax bracket is. Ultimately, tax rates vary according to the cost basis of the metal being sold. This is the amount the owner originally paid for the item. The IRS also allows certain costs to be added to the basis, such as appraisals, which can help reduce the tax bill.
When are precious metals dealers required to report sales?
In some situations, dealers must file Form 1099-B with the IRS to report payments made to non-corporate precious metals sellers. This requirement is based on the kind and quantity of items being sold. Examples that require such reporting include 1 kilogram or 1,000 troy ounces of gold and silver bars; 25 or more 1-ounce Gold Maple Leaf and Gold Krugerrand coins; and $1,000 worth of 90% silver dimes, quarters, or half dollars.
While it’s best to speak with a tax professional regarding your reporting responsibilities, Steve’s Precious Metals in Redding, CA is a great resource if you’re interested in learning more about buying and selling gold or silver. We offer a variety of precious metals items for purchase and also pay current market prices to those looking to turn their investment into a profit. Call (530) 223-0170 to schedule an appointment or visit our website for additional information on the services we provide.