Peter Wachira

A Tax Implication Guide On Precious Metals Investing It is quite popular for individuals and entrepreneurs to own precious metals in a retirement account. They are a safe asset that acts as adequate security against inflation. Owning precious metals in their best physical form gives one much-needed peace of mind during uncertain markets. A common question when people invest in precious metals is if they are supposed to pay taxes when they sell their bullion at a profit.  Holdings in precious metals are considered capital assets; thus, capital gains may apply. IRS classified precious metals as collectibles for tax purposes; therefore, they could be taxed at 28%, which is the maximum collectible gains rate. However, capital gain taxes are not assessed until the precious metals are sold. Taxation of precious metals such as gold, silver, and palladium is an important and complex subject that one should get acquainted with before investing. Let us break it down into three phases. When Buying The only tax applicable when purchasing precious metals is a value-added tax (VAT); however, in most countries, you don't pay any tax when you buy gold, whether in coins, cast, or minted bars. Investment gold is considered VAT-free in many countries. On the other hand, silver, palladium, and platinum (the PGM group metals) are considered industrial products; thus, they are subject to VAT. The tax rates vary from one country to the other. When Storing Unlike real estate, owning precious metals is tax-free. You will not be subject to annual taxes, and the metals will not attract tax as part of your income. You can store them while following their spot prices and sell them when the time is right. However, in some countries like Switzerland, you must include precious metals in your storage in the wealth tax declaration.  When Selling One main tax applies to precious metals when it comes to selling. The capital gain tax exists almost everywhere, but the rates vary from country to country. This tax is not like VAT, and it applies to all precious metals with gold included. Both taxes apply to silver thus it is not one of the reasons why silver is so cheap. Tax Implications Of Selling Precious Metals The Internal Revenue Service (IRS) considers physical holdings in precious metals as capital assets classified as collectibles. Holdings in gold, silver, palladium, platinum, and titanium in any form, such as bullion bars, bullion coins, ingots, and rare coinage, are subjected to capital gains tax. You only owe the capital gains tax after you sell your holdings and whether they were being held for over one year.  The sale of precious metal holdings is taxed differently from financial securities such as mutual funds, stocks, and ETFs, subject to long-term or short-term capital gains. Precious metals are subject to capital gains tax equal to the marginal tax rate of up to a maximum of 28% on their sales. This means that individuals in the 33%, 35%, or 39% tax brackets will only have to pay 28%. If there are any short-term gains on precious metals, they will be taxed at ordinary income rates.  Receiving Precious Metals As A Gift Or Inheritance Precious metals are sometimes received as part of an inheritance; in this case, they use a different calculation method. The calculation basis of the metals is taken to be equal to their market value on the date the person that left you the metals died.  When the metals are given to you as a gift, then the basis of calculating their tax is based on their market value on the date they were initially purchased by the person giving them to you. If the market value is less than what they paid the metals for, then the basic calculation is based on a fair market value of the time the metals are given.   Tax Reporting Requirements You are not expected to pay for the tax liabilities on precious metals sales the moment the sale is made. Instead, you should report the sale of these metals on Schedule D of Form 1040 during your tax return. Such sales are considered income; thus, depending on the metal you are selling, you must submit Form 1099-B to the IRS when the sale is made. The payment of capital gains from selling precious metals is reported annually on your annual tax filing with all the other applicable information. Conclusion Taxes are an essential consideration for precious metal investors. Although being informed as an investor helps, it does not make you a tax expert. It would be advisable to hire the services of a professional CPA or tax advisor who will guide you through the intricacies of precious metals taxation. They will help you understand the tax implications of selling precious metals and how they can affect your overall investments.  https://stock.adobe.com/au/images/top-percent-icon-pile-of-gold-bars-on-white-background-growth-rate-of-the-purchase-and-sale-of-pure-gold-gold-market-taxes-and-exchange-rates-3d-rendering-illustration/-? https://stock.adobe.com/au/images/golden-coins-on-white-background/-?