This is called capital gains tax. And since gold is an investment asset, when you sell your gold and make a profit, it's taxed as capital gains. However, depending on how you've maintained your gold, you'll have to pay taxes at the ordinary capital gains rate or at an overall rate of 28%. This is the case not only for gold coins and ingots, but also for most ETFs (exchange-traded funds), which are subject to taxes of 28%.
Many investors, including financial advisors, have trouble owning these investments. They assume, incorrectly, that since the gold ETF is traded like a stock, it will also be taxed as a stock, which is subject to a long-term capital gains rate of 15 or 20%. Investors often perceive the high costs of owning gold as profit margins and storage fees for physical gold, or management fees and trading costs of gold funds. In reality, taxes can represent a significant cost of owning 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, Sprott Physical Bullion Trusts, can offer more favourable tax treatment than comparable ETFs. Because trusts are based in Canada and are classified as Passive Foreign Investment Companies (PFIC), U.S. UU.
Non-corporate investors are entitled to standard long-term capital gains rates for the sale or repayment of their shares. Again, these rates are 15% or 20%, depending on revenue, for units held for more than a year at the time of sale. While no investor likes to fill out additional tax forms, the tax savings that come from owning gold through one of the Sprott Physical Bullion Trusts and running for annual elections can be worthwhile. To learn more about Sprott Physical Bullion 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. Like all investments in an IRA, profits from gold sold within an IRA are not taxed until the cash is distributed to the taxpayer, and distributions are taxed at the taxpayer's marginal tax rate. While secondary investments in gold, such as gold mining stocks, mutual funds, ETFs or TNCs, may generate lower returns before taxes, after-tax returns may be more attractive. However, the total costs of owning gold vary widely between types of investment and reduce after-tax returns.
Comparisons between hypothetical taxpayers generally indicate a significantly higher after-tax rate of return for any form of gold held in a traditional IRA than in a brokerage account and slightly higher than that of a Roth IRA. When you want to buy gold and silver tax-free, be sure to check local and state laws before buying. Alternatively, a physical gold CEF is a direct investment in gold, but it has the benefit of taxes on LTCG rates. With Bullion Exchanges, you can learn to sell and buy gold and silver tax-free without losing your privacy.
The CEF maintains that federal tax reporting is more complex because they are passive foreign investment companies. The annual pre-tax return of 12% of gold over the past decade has fallen to less than 10% after taxes, but if investment in gold had been classified as a capital asset and taxed at a capital gains rate of 15%, the after-tax return would have been almost 11%. The net investment income tax of 3.8% may be applied to the gold earnings in the brokerage account of taxpayers with higher MAGI than in these examples. Emma and Lucas's results, shown in Figure 3, indicate that the after-tax returns on investments in gold in a traditional IRA far exceed those of investments in gold in a brokerage account or a Roth IRA.
Buying physical gold coins, bars or ETFs involves direct exposure to gold, but the tax treatment of collectibles imposes a much higher tax rate. The after-tax annualized return on gold coins is the lowest, approximately one percentage point lower than that of the gold investment fund, which receives the LTCG treatment. You get more than 3.2 percentage points of annualized return after taxes when you use a traditional IRA instead of a brokerage account for your investment in gold mutual funds and more than 4.2 percentage points of annualized after-tax return for your investment in gold coins. .