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The selling of gold is taxable. Any profit received from the sale of gold must be recorded as a capital gain under US tax laws. Interestingly, certified precious metals dealers are not required to report small purchases of gold. However, in these transactions the government still requires the seller to report the amount of the sale and pay the applicable tax.
Under general tax law, capital gains tax is capped at 15%. However, gold falls under a specific subcategory known as “collectibles”. The tax rate on collectibles is capped at 28% in contrast to the 15% cap on other capital gains. This rate applies to the sale of collectibles that are held for a year or more. If someone sells gold they have held for less than a year, the sale is considered a short-term gain and taxed at the applicable income tax rate.
This means that short term gains could effectively be taxed at a rate higher than 28% depending on an individual’s income tax bracket.
Varieties Of Gold
Essentially all forms of gold investment are considered to be collectible investments under US tax law. Specific examples include gold bullion, gold coins, ETFs, and certificates of ownership representing gold holdings. Gold jewelry is a notable exception as it is not considered a collectible like other forms of gold.
There are a couple ways to simulate gold investment while only paying the standard capital gains rate of 15% on long-term gains. One option is to buy stock in a gold mining company. These are regular stocks, but their value is highly dependent on the value of gold. Another alternative is to invest in a closed-end fund that holds gold. Closed-end funds trade like stocks and gains are taxed at the standard capital gains rate.