In these trying economic times, I have heard from many of my clients who have decided to add gold and silver to their savings pot to hopefully even out current stock market losses they are incurring.
Well, here is what I tell those clients… “Watch out! The tax you pay on selling gold and silver could end up being twice what you pay for other long-term investments.”
What? You say! Yup! Congress thinks that investing in precious metals, like gold and silver (as well as other collectibles like artwork, antiques, vintage wines, rare coins, and stamps) should be “rewarded” with paying a higher tax, after all, the thinking is that only the “rich” dabble in such items, so why not make them pay more?
Stock investors generally pay one of three tax rates on their profits — 0%, 15% and 20%, the top rate — based on their income. These rates are preferential with respect to an investor’s regular income tax rates, of which there are seven (10%, 12%, 22%, 24%, 32%, 35% and 37%)
Conversely, the capital-gains tax rate on collectibles aligns with these seven rates, up to a 28% maximum. That means an investor whose annual income puts them in the 12% tax bracket would pay a 12% tax rate on their collectibles profits; an investor in the 37% bracket would be capped at 28% on their collectibles profits.
The form of physical metal doesn’t matter. Gains on gold coins, bars, gram gold accounts and gold certificates can all be taxed at that maximum 28% rate. Even gains from exchange-traded funds that own physical metals can be taxed at the 28% maximum rate. However, if you sell gold mining stocks or shares of a mutual fund that invests in those stocks, gains are taxed at the regular federal rates, including a maximum 20% capital gain rate.
But wait! There’s another wrinkle in all this. Regarding gold futures. A blended tax rate (60% long-term; 40% short-term) applies as if the gold futures were sold at the end of the tax year.
So much fun eh? Leave it to Congress to mess with stuff to the point of making it so confusing. Don’t like it, contact your congressional representative. While you’re on the phone with them, ask them to stop taxing Social Security benefits for elderly folks. I’ve already been on a rant about how evil that is in a prior article.
Have you heard? Psalm 4:8 says, “In peace I will both lay myself down and sleep, for you alone, Yahweh, make me live in safety.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.