Investors often look to precious metals like gold and silver as a hedge against inflation or other economic shocks. However, these assets are taxed differently than stocks and bonds.
USA Today interviewed FML partner Eliot Bassin for the article Capital gains tax on precious metals: Is gold taxed differently than other investments? Gold and silver are taxed as collectibles, similar to art or antiques. In this excerpt, Bassin explains how your tax bracket impacts what you might pay when you cash out.
What tax rate will you pay on gold and silver gains?
The 28% collectibles tax rate is a maximum rate, not necessarily the rate you’ll pay. If your ordinary income tax rate is lower than 28%, your precious metals gains are generally taxed at that lower rate.
“For example, if a taxpayer’s marginal tax rate is 22%, they would pay tax at their marginal rate,” says Eliot Bassin, accountant, financial planner and partner at Fiondella, Milone & LaSaracina LLP.
For example, if you bought gold for $1,000 and later sold it for $2,000, your taxable gain would be $1,000. At a 22% tax rate, you would owe $220 in federal capital gains taxes. At the maximum 28% collectibles rate, you would owe $280.
Your exact tax bill depends on your income, holding period and whether any additional taxes, such as the Net Investment Income Tax (NIIT), apply.
The US government handles gold and silver differently to encourage investors to hold the US dollar. However, precious metals are also subject to short term or long-term capital gains depending on how long you own them.
Read the full article in USA Today.