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Avast!
Avast! In honor of the recent International Talk Like a Pirate Day, let’s look at the tax ramifications of every buccaneer’s favorite treasure: gold! The precious metal has climbed to new records and is on an 11 year bull market streak. If you bought some gold and are looking to cash out soon, what sort of effect will this have on your taxes?
First, like any income, gain from the sale of gold is taxable. It is a capital asset, much like company stock, a Picasso painting or a baseball card collection. However, unlike company stock, gold bullion is classified as a collectible. Thus, long term gain from the sale falls under the higher “collectibles” tax rate. To calculate gain, you must subtract the basis – what you paid for it – from the proceeds – the price at which you sold it. If held for a year or less, the gain is taxed at ordinary rates, which are based on your income. If held for over a year, gain on the sale of gold is taxed at a rate no higher than 28%. So, if you bought some gold coins for $50 and sold them more than a year later for $100, you would have $50 in gain and 28% on that amount – $14 – in taxes.
Do you want to unload the gold but avoid taxes on the gain? Consider this: contributing the gold to a qualified charity may be beneficial, as you could potentially avoid any tax and instead get to take the deduction for the fair market value of the gold. So, using the example above, you could get a $100 charitable contribution as an itemized deduction. Note that this can depend on the type of gold you have and to what type of charity it is donated, so please seek advice from your accountant beforehand.
While any pirate would cast a grimy grin at the current gold prices, don’t let tax issues anchor your hopes before they’ve set sail. Keep in mind the time period and the original amount you paid for the gold, and you’ll find yourself in clear waters.
Unfortunately, it is impossible to give comprehensive tax and accounting advice over the internet, no matter how well researched or written. Before relying on any information provided here, contact a tax or accounting professional to discuss your particular situation.
