How to Take Advantage of Tax Breakups with Precious Metals
Are you an investor in the US looking to invest in precious metals like gold, silver, platinum, and palladium? It may sound like a great idea up front, but when it comes time to sell your precious metal and pay taxes, you might find yourself under heat.
According to the Us Internal Revenue Service (IRS), gold and other precious metals are put under the ‘collectibles’ category, along with gemstones, stamps, art, rugs, antiques, etc. This can be a big problem for people who wish to invest in precious metals because collectibles are subject to a 28% tax.
Collectibles Are Subjected To a 28% Tax.
When gold, silver, platinum, and palladium bars and coins are categorized as collectibles, you might think that exchange-traded funds (EFTs) might be the answer. But unfortunately, EFTs are also included in the collectibles category and taxed at 28% instead of being taxed at 15% or 20% like long-term capital gains.
So, not only do you have to deal with high costs associated with owning gold and other precious metals that come from storage fees, trading costs, and so on, but you also have to deal with significantly high tax rates.
Thankfully, the 28% tax is the maximum amount that precious metals are taxed. This means that if you fall under the 32%, 35%, or 37% tax bracket, the maximum tax you pay upon selling your precious metals is 28%. As for the other tax brackets, you would pay a lower tax amount. For example, if you fall under the 12% tax bracket, you would pay a 12% collectibles tax on your precious metals. As for short-term gains on your precious metals, you’ll be taxed at regular income rates.
So, What Else Can Be Done?
As someone wanting to invest in precious metals, you might be wondering what caveats – if any – are there. Well, we’ve got one in mind.
It is possible to have some EFTs that aren’t subjected to the 28% collectibles tax. For this option, you would need to invest in EFTs that are not directly liked to precious metals or physically backed by precious metals. These kinds of EFTs are backed by futures or contracts instead.
Additionally, the 28% collectibles tax also applies to EFTs that have been structured as trusts. So, if the EFT isn’t structured in that way, then according to the IRS, you won’t be subjected to that higher tax rate.
The Most Reliable Gold and Silver Investment Company
Orion Metal Exchange is one of the best gold and silver investment companies. We ensure complete transparency in our online product pricing, provide precious metals ira account investment services, and can assist you in determining which precious metal investment is right for you.
Get in touch with us to learn more about investing in precious metals and how precious metals are taxed.