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%. Gains on most other assets held for more than a year are subject to long-term capital gains rates of 15% or 20%. The Internal Revenue Service (IRS) considers physical holds of precious metals such as gold, silver, platinum, palladium and titanium to be capital assets specifically classified as collectibles. Holdings of these metals, regardless of their shape, such as bullion coins, ingot ingots, rare coins or ingots, are subject to capital gains tax.
Capital gains tax is only due after the sale of such shares and if the shares were held for more than one year. In general, you have to pay taxes when you sell gold if you make a profit. According to the IRS, precious metals such as gold and silver are considered capital assets and financial gains from their sale are considered taxable income. As an investor, you should keep in mind that capital gains are taxed at a different rate, much lower, than labor income.
This is called capital gains tax. And since gold is an investment asset, when you sell your gold and make a profit, it's taxed as capital gains. . Long-term earnings on ingots are taxed at the ordinary income tax rate, up to a maximum rate of 28%.
Short-term earnings on ingots, like other investments, are taxed as ordinary income. An asset must be held for more than one year for gains or losses to be long-term. Earnings from investments in physical gold and physical gold ETFs outside of an IRA are taxed as collectibles. Like all investments in an IRA, profits from gold sold within an IRA are not taxed until the cash is distributed to the taxpayer, and distributions are taxed at the taxpayer's marginal tax rate.
If you invested in gold and sold it for profit, you're probably looking for ways to minimize your taxes. A gold ETN does not physically hold gold, but at maturity it produces a return equivalent to that of an investment in gold. However, the total costs of owning gold vary widely between types of investment and reduce after-tax returns. My recommended way to own gold is through exchange-traded funds (ETFs), because they are very liquid and have low costs.
Fixed equity funds (CEFs) are similar to gold ETFs and are traded like a stock, but are structured as trusts. While secondary investments in gold, such as gold mining stocks, mutual funds, ETFs or ETNs, may generate lower pre-tax returns, after-tax returns may be more attractive. It's also important to consider the differences in after-tax returns between the types of gold investments held in a brokerage account. It has to be an investment in a similar situation, so if you sell gold, you'll have to reinvest the profits in precious metals.
The annual pre-tax return of 12% of gold over the past decade has fallen to less than 10% after taxes, but if investment in gold had been classified as a capital asset and taxed at a capital gains rate of 15%, the after-tax return would have been almost 11%. When gold increases in value and provides profits, strong pre-tax returns may not translate into strong after-tax returns. This means, for example, that if you are in the 15% tax bracket, your profit on gold would be taxed at 15%, but, if you were in the 35% tax bracket, you would have to pay a 28% tax. Gold futures contracts are an agreement to buy or sell gold at a specific price, place and time with a standard quality and quantity of gold.