Capital Gains Taxes For Precious Metals | Investor Guide
At a Glance:
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- Capital gains taxes are due when you sell a precious metal.
- If you hold your investment for more than a year, you’ll pay long term capital gains taxes.
- Gold and silver investments held for less than a year are taxed as short term capital gains.
Capital Gains Taxes For Precious Metals – How Much Will You Owe?
Like all investments, precious metals are taxed. Precious metal taxes fall into two categories: sales taxes and capital gains taxes. Sales taxes for precious metals are determined by state governments and are collected at purchase. When you sell gold, silver, and other metals, you’re also obligated to pay capital gains taxes on your profits. Both the timespan of your investment and your marginal tax rate can help determine how much you’ll pay in capital gains taxes when selling gold or silver.
Figuring out the tax implications of your precious metal investments can be tricky. On this page, we’re taking a closer look at the general rules behind how capital gains taxes are calculated for precious metals.
How Precious Metals Are Taxed | The Basics
Precious metals can be taxed at two different points, depending on where you live. Sales taxes are paid when someone buys a product. Since there’s no federal sales tax, sales taxes for precious metals are determined by each state. Some states have no sales tax at all, and others provide exemptions for precious metals. Most states exempt some precious metals from sales tax collection.
By contrast, capital gains taxes are assessed after you sell a precious metal. Capital gains taxes are determined by the federal government, but a number of states also have a state capital gains tax. Capital gains taxes apply to all investments – including gold and silver. There isn’t a way to avoid paying capital gains taxes on physical bullion holdings, but understanding how these taxes are assessed can help you save money.
| Sales Taxes | Capital Gains Taxes |
|---|---|
| Decided By State Governments | Determined on a federal level |
| Paid when buying precious metals | Due when metals are sold at a profit |
| Flat rate that varies by state | Rates depend on investment lifespan |
| Unaffected by buyer tax bracket | Rate affected by seller’s marginal tax rate |
Sales Taxes For Precious Metals
Sales taxes are collected when a consumer purchases a product. Sellers are required to collect sales taxes on taxable items. Most precious metal dealers will add any applicable sales tax to your order total at checkout, so you don’t have to make those calculations yourself.
Like capital gains taxes, sales taxes are unavoidable in states that do not exempt precious metals. Many states offer some exemptions for gold, silver, and specific types of bullion products.
Each State Has Its Own Rules
It is important for investors to remember that there is no federal sales tax on precious metals. Instead, each state decides their own rules for which products sellers must collect sales taxes on. Gold and silver sales taxes vary from state to state. Like we mentioned earlier, only some states completely exempt precious metals from sales tax collection. To learn more, investors should read up on the sales tax laws for their state.
State sales tax rules are also constantly changing. New laws in Wisconsin and Kentucky this year eliminated sales taxes for precious metal products. As more states consider revising how their tax laws define precious metals, expect to see further news in the future.
Precious Metal Capital Gains Taxes
Unlike sales taxes, capital gains taxes for precious metals are assessed by the federal government. Regardless of the laws of his or her state, each investor is required to pay taxes on their capital gains when they sell a precious metal product. Each state also has the right to set its own capital gains tax rates. We won’t get into specific states on this page, but the following states have no capital gains taxes:
- Alaska
- Florida
- New Hampshire
- Nevada
- South Dakota
- Tennessee
- Texas
- Wyoming
All other states have some sort of capital gains tax, although the particular rate depends on which state investors reside in. The federal government’s capital gains tax rate for precious metals depends on both the timeline of an investment and the investor’s marginal tax bracket.
Capital Gains Tax Rates For Precious Metals
At the federal level, precious metals are subject to capital gains taxes as collectible investments, according to the Internal Revenue Service (IRS). The tax rate for profits made from investing in gold or silver depends primarily on the length of time investors hold onto their investments.
Short Vs. Long Term Precious Metal Capital Gains Taxes
Like other investments, precious metals can either be held for the short-term or the long-term. The IRS makes a distinction between these two categories of investing, and each type of investment carries a different tax rate. Bullion products held for more than one year are subject to the capital gains tax rate for collectibles, which is capped at 28% of the investment’s profit. The exact tax rate for long term capital gains from selling gold depends on your marginal tax rate.
| Short Term Precious Metal Capital Gains Tax | Long Term Precious Metal Capital Gains Tax |
|---|---|
| This tax applies to precious metal investments held for less than one year. Short term capital gains are taxed at a percentage equal to an investor’s marginal tax rate. There is no maximum tax rate for short term precious metal capital gains. | Precious metals held for longer than one year before sale are taxed as long term capital gains. These taxes are also determined by an investor’s marginal tax rate – but they cap out at 28 percent. |
For investments held for less than a year, gains are taxed at a rate equal to the seller’s marginal tax rate.
Short Term Holdings – How is Bullion Taxed?
Short term capital gains refer to profits made from investments held for less than one year. If you keep a gold or silver coin for less than one year, you’re required to pay a short-term capital gains tax. This tax is a percentage of the profit you make – the positive difference between the price you paid at purchase and the price you receive at sale.
Compared to long term gains, short term capital gains are pretty easy to assess. When you pay a short term capital gains tax for gold or silver, you’ll be charged based on your ordinary marginal tax rate. In other words, short term gold holdings are taxed as regular income.
Long Term Precious Metal Investment Tax Rates
If you hold onto a gold product for more than one year before selling, your profits are subject to a long term capital gains tax. Gold and silver products are considered collectibles by the IRS. Long term capital gains taxes for selling these investments is equal to the seller’s marginal tax rate – but only up to a maximum of 28%.
Since 28% is lower than several marginal tax rates, high income investors benefit from keeping their investments for more than one year. Even if your marginal tax rate is 33%, you’ll only pay a 28% long term capital gains tax when you sell gold, silver or another precious metal.
How to Buy Tax-Free Gold
It is not possible to find tax-free gold. All precious metal products are subject to taxation. However, it is only required to pay sales taxes on precious metal purchases in certain states. Regardless of where you live, capital gains taxes are paid to the federal government when you decide to liquidate your investment portfolio.
Buying tax-free bullion isn’t possible, but you might be able to minimize your tax burden by better understanding federal and state tax laws.
States With No Precious Metal Taxes
Five states impose no state sales tax at all:
- Delaware
- Montana
- New Hampshire
- Oregon
- Alaska
In Alaska, certain jurisdictions are allowed to impose their own local sales taxes on precious metals. Delaware, Montana, New Hampshire, and Oregon have no sales taxes in any capacity. If you live in one of these states, you won’t have to pay taxes when you buy precious metals online.
45 states have exempted certain precious metals from sales taxation. Be sure to read up on the precious metal sales tax rules for your state.
Can Gold Capital Gains Taxes Be Avoided?
Investors are required to pay capital gains taxes to the federal government when they buy or sell gold. It isn’t possible to avoid paying this tax, but collectors should pay careful attention to the length of their investment in order to avoid paying extra capital gains taxes. Generally, financial experts advise holding gold as a long term investment.
Do you still have questions? Speak to someone on our support team – we’re always happy to help simplify the gold buying and selling process.
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About The Author
Michael Roets
Michael Roets is a writer and journalist for Hero Bullion. His work explores precious metals news, guides, and commentary.