Which Gold Coins Are Tax Free?
Taxes are complicated, and precious metals are no exception to this rule. Figuring out what your tax burden is when buying and selling gold coins can be a difficult process. Once you understand the basic rules for how gold coins are taxed, it gets quite a bit easier.
Which gold coins are tax free? And more importantly, how can you minimize your tax burden when buying and selling gold coins? In today’s new investor guide, we’re walking you through everything you need to know about which gold coins are tax free.
Are Gold Coins Taxed?
Gold coins are indeed taxed. Some investors think that certain gold coins are completely tax exempt. While there are exceptions made for certain types of gold coin investments, most of the investing that the average collector does won’t fall into these rare categories.
For example, gold coins added to a precious metals IRA are protected by the same tax shield given to traditional Individual Retirement Account contributions. However, the IRS has stipulated that precious metal IRA investors are not allowed to physically hold their investments. This means that, while you won’t pay taxes when adding precious metals to your IRA, you also won’t actually ever hold your gold coins physically.
But there’s a lot more to gold coin tax regulations that the average investor should understand. In certain situations, some gold coins might be tax free – but these scenarios are exceedingly rare. Which gold coins are tax free and when? To answer this question, we’ll need to understand just a bit more about the types of taxes that apply to gold coins.
Types of Gold Coin Taxes
Gold coins are governed by two main tax protocols: capital gains taxes and collectible taxes. In a sense, these two categories go hand in hand. Because the IRS considers almost all gold bullion coins to be collectibles, the capital gains assessment used for collectibles will apply to most of your standard gold coin sales.
In order to understand how gold coins are taxed and which gold coins are tax free, there’s one more thing you need to consider: sales taxes. We’ll cover all of these types of gold coin taxes in the next few subsections.
Gold Coins and Capital Gains Taxes
Just like traditional assets such as stocks and ETFs, you’ll be expected to pay a special tax called a capital gains tax when you sell your gold coins. However, physical precious metals like gold coins are taxed a bit differently than stocks and other traditional asset classes.
Generally, capital gains are split into two separate categories, both of which are pretty simple to understand. Short term capital gains happen when you hold an asset for less than a year. The profit you make from selling the asset is taxed using a certain percentage. Long term capital gains, as you might imagine, are owed to the IRS when you hold an asset (such as a gold coin) for longer than one year.
Investors should also remember that the tax rates applied to gold coin sales apply after the sale of the coin, and that these taxes apply only to your profits. We’ll talk more about what happens if you lose money selling gold coins later. But for now, you should know that you’ll only pay capital gains taxes if you profit from your gold coin investment.
So which gold coins are tax free? When it comes to capital gains, the answer is none of them. All gold coins are considered taxable when you hold them and profit from their sale. Let’s take a closer look at how short and long term capital gains taxes apply to gold coins.
Before we get into the details, check out this chart to get a general idea of how capital gains taxes apply to gold coins.
|Short Term Capital Gains
|Long Term Capital Gains
|Held for Less Than 1 Year
|Held for Over 1 Year
|Normal Income Tax Rate
|Marginal Tax Rate – Max 28%
|Losses < $3,000 Deductible
|Losses < $3,000 Deductible
Short term taxes for gold coins are relatively easy to understand. Which gold coins are tax free when you sell them quickly? Basically, none of them. Short term capital gains taxes are assessed based on your regular income tax rates.
If you hold a gold coin for more than one year before selling it, you’ll owe long term capital gains taxes to the federal government. The good (or perhaps bad) news is that these short term gains are just taxed using your marginal tax rate. This rate also caps off at 28%.
In other words, people who fall into marginal tax brackets above 28% actually pay a lower percentage for selling their gold than they would if the sale were considered ordinary income.
To figure out how much money you’d owe in capital gains taxes, you’ll need your marginal tax rate, the price you paid for your investment, and how much money that investment will be sold for. Subtract the price you paid from the sale value, and you have your profit. Next, just multiply that figure by the decimal version of your marginal tax rate.
As an example, say that you bought a gold coin for $1,500, held onto it for over one year, and then sold it for $2,500. You made $1,000 in profit. Now, let’s say that your income gives you a marginal tax rate of 33%. Because long term capital gains taxes cap off at 28%, you’d multiply your profit by .28. There we have it – you’d owe $280 in long term capital gains taxes after selling your investment.
Collectible Taxes for Gold Coins
Gold coins are considered collectibles by the Internal Revenue Service. This is where we get the 28% cap on capital gains taxes that we spoke about a moment ago. For collectibles like coins, art, or other rare items (including bullion), the maximum long term capital gains tax is assessed at 28%. Which gold coins are tax free? Unless you stumble across a loophole, all gold coins are taxed as capital gains when you profit from selling them.
When Are Taxes Collected on Gold Coins?
Depending on where you live and the laws of your particular state, there are two main ways you can be taxed while investing in gold coins. You might have to pay a sales tax on your gold or silver coins, although most states have eliminated this tax.
Which gold coins are tax free? In most states, certain gold coins are sales tax free. However, this doesn’t mean you’re off the hook for federal capital gains taxes, which are collected when you decide to sell your coins for a profit.
Sales Tax During Purchase
Some states may require your seller to collect sales tax when you purchase gold coins from them. For the most part, states do not require that sales taxes be collected on qualifying gold bullion coin purchases. However, we strongly recommend reading up on the bullion tax laws for your state before buying a new gold coin.
Remember, sales taxes are decided by each individual state. While the government could theoretically levy a nationwide tax on certain products, this isn’t common.
Which gold coins are tax free in your state? If you want to save money on sales taxes, it’s important that you research the specific rules that your state has put into place.
Which Gold Coins Are Tax Free Upon Sale
So which gold coins are tax free when it comes to sales taxes? For customers in 41 of our 50 states, sales taxes on gold coins aren’t a thing. However, you might have to pay sales taxes on certain gold coins – depending on which state you call home.
A few states that do collect sales taxes on gold coins make exceptions for legal tender coins. Legal tender means that a coin could theoretically be used to purchase goods or services in the United States. If you live in Florida, for example, you won’t pay sales taxes when buying an American Gold Eagle, since this is a legal tender coin from the U.S. Mint.
Which gold coins are tax free in most states? For the vast majority of U.S. states, all gold coins are sales tax free. The only tax you’ll need to worry about comes into play when you prepare to sell your investment for profit.
Capital Gains Tax After Sale
This is the second way that gold coins are taxed. Because capital gains taxes are determined by the IRS, you don’t need to worry about state-specific rules here. Which gold coins are tax free when it’s time to sell? Sadly, the answer is that no gold coins are tax free – at least where capital gains are concerned.
As we explained earlier, gold coin capital gains taxes vary based on two factors: the length of time you hold your investment and your marginal tax rate. If you hold your gold coins for more than one year, you’ll pay a tax based on your marginal tax rate. Remember, though, that this figure tops out at 28%, because gold coins are classified as collectibles.
If you’re more of a short term trader, expect to pay the federal government your short term gains taxes based on your current income tax rate. When we talk about which gold coins are tax free, investors should have a clear understanding of their own income and marginal tax rates.
Exceptions – Which Gold Coins Are Tax Free?
Finally, it’s time that we take a look at one of the most common questions we get about gold coin taxes. Which gold coins are tax free? Coins that you pass onto others as an inheritance or a gift may not be subject to capital gains taxes. Additionally, we’ll explain IRA eligible gold coins, taking a loss on gold coins, and the American Gold Eagle’s tax exceptions below.
Inherited and Gift Gold Coins
Which gold coins are tax free? When it comes to federally mandated capital gains taxes, the only real way to avoid paying taxes when selling gold coins is to gift or give the coins to someone as part of an inheritance.
As of 2023, you are allowed to gift gold coins amounting to no more than $17,000 per recipient each fiscal year. When you do this, you won’t be asked to pay a federal short or long term capital gains tax. The same is true for inheritances. If you leave a gold coin to someone in your will, your estate won’t be required to pay a capital gains tax.
But recipients are not off the hook for capital gains taxes. Which gold coins are tax free if they’re gifted? Whether you get coins from a gift or an inheritance, you’re still expected to pay capital gains taxes if – and when – you sell them for a profit.
To complicate matters even more, the IRS calculates your profits on a capital gains from a gift based on the market value of the asset at the time of the gift. The same is true for inherited gold coins. This means that you might actually end up owing a considerable amount of money to the IRS when you sell a gifted or inherited gold coin.
Losing Money When Selling Gold Coins
One of the final considerations for which gold coins are tax free is an important one, even if we don’t see it come up very often. Capital gains taxes are calculated based on how much profit you make from an investment over time.
But what happens if you don’t profit from selling your gold coins? What if you actually lose money?
According to the IRS, you can actually use capital gains losses to offset other gains that you list on your tax return. If you buy a gold coin for $2,500 and then sell it two years later for $1,000, you can take that loss of $1,500 and cancel out some of the tax you’d owe for other investment profits.
The amount you can deduct from an eligible long term capital loss caps out at $3,000. Which gold coins are tax free? Unfortunately, even gifted coins are not completely tax free. When you choose to sell, you’ll pay taxes on your gold coins.
IRA Eligible Gold Coins
Which gold coins are tax free? If we had to pick a set of coins that we could consider completely tax free, it’d be IRA contribution gold coins. Like we mentioned earlier, these coins never enter your physical possession. They’re stored at a licensed depository after being secured by your precious metals IRA custodian.
Despite the fact that you won’t actually possess physical gold through a precious metals IRA, these gold coins aren’t taxed the same as physical precious metals. Instead, they’re shielded from gains taxes – just like traditional IRA contributions.
Only certain gold coins are considered IRA eligible. At the end of this guide, we’ll link you to a page that explains everything you ended to know about IRA eligible gold.
Are American Gold Eagles Tax Exempt?
Which gold coins are tax free? If we polled a hundred gold stackers, a good chunk of them would claim that the American Gold Eagle is tax free. This is sort of true, but it can also be misleading.
Is the American Gold Eagle tax free? This coin is considered by most states to be legal tender, since it’s produced and backed by the U.S. government and can be used to purchase goods and services.
A few states that require sales taxes on gold coins make an exception for legal tender coins like the American Gold Eagle. If you live in Florida, you can get out of paying sales taxes on your bullion by purchasing American-made Gold Eagles.
Gold Eagles are not exempt from the federally enforced capital gains tax, however. When you sell your American Gold Eagles, you’ll be expected to pay taxes on your profits – just like you would for any other investment.
There’s a lot of conflicting information about there concerning which gold coins are tax free. While American Gold Eagles can sometimes be excluded from state sales tax regulations, they’re not exempt from the federal capital gains taxes you’re expected to pay when you sell these investments at a profit.
Final Thoughts: Which Gold Coins Are Tax Free?
So which gold coins are tax free? Like everything in the wild world of taxation, this is a complicated question. On one hand, most states require no sales taxes on many popular gold coins.
However, it isn’t just your state you need to worry about. Capital gains taxes, both long and short term, are required once you sell your coins for a profit.
By researching your states laws and consulting with a financial advisor, you can make sure you’re building your gold stack without opening yourself up to issues with the IRS. Instead of just worrying about which gold coins are tax free, smart investors know how to minimize their tax burden by smart gold stacking.
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About The Author
Michael Roets is a writer and journalist for Hero Bullion. His work explores precious metals news, guides, and commentary.