Normally, all long-term capital gains from investments in precious metals (including gold, silver, platinum and palladium) are subject to a tax rate on collectibles of 28% (short-term capital gains are subject to a tax rate of 10 to 37% in 2020). The Internal Revenue Service (IRS) considers that physical holds of precious metals such as gold, silver, platinum, palladium and titanium are considered by the Internal Revenue Service (IRS) as capital assets specifically classified as collectibles. Holdings of these metals, regardless of their shape, such as bullion coins, ingot ingots, rare coins or ingots, are subject to capital gains tax. Capital gains tax is only due after the sale of such shares and if the shares were held for more than one year.
Holdings in precious metals such as gold, silver or platinum are considered capital assets and therefore capital gains may apply. When it comes to taxes, the IRS classifies precious metals as collectibles and therefore may be taxed at the maximum rate of capital gains raising of 28 percent. For tax purposes, precious metals are considered collectibles, according to the IRS. Collectibles include silver ingots, although their value depends only on metal content and not on rarity or artistic beauty.
This is important because the maximum tax rate on long-term capital gains on collectibles is 28 percent. By contrast, the maximum tax rate on long-term capital gains for stocks and most other investments is 15 percent. 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 gold ETFs are traded as stocks, they will also be taxed as stocks, which are 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.
For individual investors, Sprott Physical Bullion Trusts may offer more favorable tax treatment than comparable ETFs. Since trusts are based in Canada and are classified as passive foreign investment companies (PFIC), U.S. non-corporate investors are entitled to standard long-term capital gains rates by selling or repaying their units. 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 of holding gold through one of the Sprott Physical Bullion Trusts and participating in the annual elections can be worth it. 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. The U.S.
Internal Revenue Service (IRS). UU. considers these precious metals (as well as platinum and palladium) to be capital assets. Physical possession of gold and silver, regardless of form, is subject to capital gains tax.
This tax comes into play when metals are sold. However, in the case of precious metals, taxes only apply when they are sold. As long as you have a piece of gold, silver, platinum or palladium in your possession, you are completely exempt from taxes. Investors with a Roth IRA pay income tax in advance on a purchase, but all future growth is tax-free; investors with a pre-tax IRA pay their usual types of income taxes when they withdraw money in retirement.