DiSabatino CPA Blog

Mike DiSabatino CPA

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Did you get bit by the gold buying bug? Careful about the wounds...

Did you get bit by the gold buying bug? Careful about the wounds...

Have you acquired gold as an investment hedge the last few years?

Watch out for a tax whammy. Gold is subject to a special long-term capital gains rate, significantly higher than the usual rate!  In fact, depending on your situation, a long-term capital gain resulting from the sale of gold could trigger a tax rate almost double the rate you’re paying on your other long term gains.

The usual maximum federal income tax rate on long-term gains from sales of securities and most other assets you’ve held longer than one year is 15%. If you’re a single filer with 2013 taxable income above $400,000 or $450,000 for joint-filing married couple, the maximum federal rate increases to 20% (For 2014, the thresholds for 20% increase to $406,750 and $ 457,600 respectively.)

However, Physical metals such as gold and silver – along with artwork, antiques, vintage wines and coins rare and stamps – are classified by the IRS as “collectibles.” If you hold a collectible for a year or less before selling it, the short-term capital gain is taxed at ordinary income rates.

Conversely, if you sell a collectible held longer than a year, the gain is treated as a long-term capital gain subject to a “special” maximum rate on long-term gains from collectibles if your regular marginal rate is 33%, 35% or 39.6%

The form of physical metal does not matter. Long-term gains from gold coins, bars, grams gold accounts and certificates are all subject to the maximum 28% rate. Even exchange traded funds (ETFs) owning physical metals are taxable as collectibles.

In addition, other special rules govern the tax treatment of gold futures. A blended tax rate (60% long term; 40% short term) applies as if the futures were sold at the end of the tax year. See your tax pro for more details.

Strategy: One easy way to avoid tax complications on sales of gold is to hold this precious metal in a tax-deferred retirement account.

As always, should you have any questions or concerns regarding your situation please feel free to call.

DiSabatino CPA
651 Via Alondra, Suite 715
Camarillo, CA 93012

Phone: 805-389-7300

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