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%. 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, according to the IRS. Whether or not you have to pay sales tax on a purchase of precious metals depends on where you are located.
Some states require sales tax collection, while others don't. Some states may also charge sales tax to a certain extent, and there may be exemptions beyond that point. Long-term gains on bullion are taxed according to your ordinary income tax rate, up to a maximum rate of 28%. Short-term gains from bullion, 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. You only pay taxes when you sell your gold in cash, not when you buy more gold with that money. Margins on gold bars are usually lower than on country-specific gold coins, but both are collectibles for tax purposes. Alternatively, a physical gold CEF is a direct investment in gold, but it has the benefit of taxes on LTCG rates.
The annualized after-tax return of gold coins is the lowest, about one percentage point lower than that of the gold mutual fund, which receives the LTCG treatment. While secondary gold investments, such as gold mining stocks, mutual funds, ETFs, or ETNs, can produce lower pre-tax returns, post-tax returns may be more attractive. Gold is often taxed differently than other investments, and tax rules vary depending on which of the many different ways of investing in gold you choose. In other words, gold coins are taxable based on their total value, rather than just weighing how much gold they are made of.
