Preface: The desire of gold is not for gold. It is for the means of freedom and benefit. –Ralph Waldo Emerson
Reporting and Taxation for Investors in Precious Metals
Credit: Benjamin Gelbart
The term “precious metals” generally means gold and silver, but also includes other metals such as platinum and titanium.
Investment grade precious metal that has been refined to high levels of purity is known as bullion. Bullion includes both coins and bars.
Sale of bullion is taxed as a capital gain or loss in a way similar to other investments like commodities or stocks. This means that you must report not when you buy, but when you sell the investment. If the amount of the sale is greater than the amount of your original purchase, you have a capital gain. If it is smaller, you have a capital loss.
When reporting the sale of precious metals, as with similar investments, you must include five data points:
1) A description of the asset
2) The original date of purchase
3) The cost or other basis of the purchase
4) The date of sale
5) Proceeds from the sale (net of transaction costs)
Gain on assets held for more than one year are considered long-term. Precious metals are considered collectibles, which means that their long-term gains cannot be taxed at more than 28%. Ordinary tax rates in 2023 range from 10% to 37% depending on your income. So the rate cap on long-term gains from collectibles will only make a difference to taxpayers whose total income is large enough to put them in a tax bracket of over 28%.
Gain on an asset held for a year or less is considered short-term and is in any case taxed at ordinary rates.
Note that all transactions that result in capital gains or losses should be reported. Despite any rumors you may have heard, there is no minimum threshold that would except you from having to report a capital transaction.
Exchange traded funds that hold precious metals are likewise considered collectibles for tax purposes. However, stock in companies than mine precious metals are not.
Another issue to consider when investing in precious metals is that certain types of coins, when sold in certain quantities greater than certain amounts, require that the seller issue a form 1099-B to report the sale. This is not an additional tax, it is just an additional filing requirement. The quantities that require the seller to issue a 1099-B differ depending on the type of coin or bar sold. When required, form 1099-B must be filed by January 31 following the year the sale is made.
The types of precious metals sales that would require you to issue a 1099-B are determined by the Commodity Futures Trading Commission. Experienced precious metals traders are also a good source of information on this topic and often maintain their own lists.
Note that whether or not the sale you make requires you to issue a 1099-B, it must in any case be reported on your income tax return.