The Internal Revenue Service (IRS) classifies gold and other precious metals as “collectibles” that are taxed at a long-term capital gain rate of 28%. Gains on most other assets held for more than one year are subject to long-term capital gain rates of 15% or 20%. This is the case not only for gold coins and bars, but also for most ETFs (exchange-traded funds) that pay a 28% tax. Many investors, including financial advisors, have trouble owning these investments because they incorrectly assume that because the gold ETF is trading as a stock, it will also be taxed as a share, which is subject to the long-term capital gain rate of 15% or 20%.
Investors often perceive the high costs of owning gold as the trader's profit margins and storage fees for physical gold, or the management fees and trading costs of gold funds. In reality, taxes can represent a significant cost to the possession of gold and other precious metals. Fortunately, there is a relatively easy way to minimize the tax implications of owning gold and other precious metals. Individual investors can take advantage of Sprott Physical Bullion Trusts, which offer more favorable tax treatment than comparable ETFs.
Because trusts are domiciled in Canada and are classified as Passive Foreign Investment Companies (PFICS), non-corporate investors in the United States are eligible for standard long-term capital gain rates for the sale or redemption of their holdings. Again, these rates are 15% or 20%, depending on revenue, for units held for more than one year at the time of sale. Making the annual elections to own gold through one of Sprott's Physical Bullion Trusts can be worthwhile in terms of tax savings. To learn more about these 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.Holdings of precious metals such as gold, silver, or platinum are considered capital assets and, therefore, capital gains may apply. When it comes to tax purposes, the IRS classifies precious metals as collectibles and, therefore, may be taxed at the maximum collectible capital gains rate of 28 percent. In general, you have to pay taxes when you sell gold if you make a profit. Precious metals such as gold and silver are considered capital assets, and financial gains from their sale are considered taxable income.In other words, gold coins are taxable based on their total value, rather than just weighing how much gold they are made of.
You only pay taxes when you sell your gold in cash, not when you buy more gold with that money. Roth IRA investors pay income tax up front on a purchase, but all future growth is tax-free; investors with a pre-tax IRA pay their regular income tax rates when they withdraw money during retirement.
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