This article has been reviewed and updated for 2024.
Do you have to pay Capital Gains Tax on gold bullion? Like anything to do with tax, there is no simple ‘yes’ or ‘no’ answer!
What is Capital Gains Tax?
Capital Gains Tax (CGT) is the tax payable on the gain incurred when you sell an asset. You do not pay CGT on the total amount you sell the asset for, only the gain made upon sale of the asset is taxable.
Examples of where it is typically applied would be the sale of second homes, stocks, businesses and gold and silver bullion.
Also read: What is Gold?
Do I pay CGT on gold bullion?
You do pay CGT on some gold and silver bullion. The IRS considers non-legal tender gold bars and coins to be ‘collectibles’ for income tax purposes.
If you hold the gold for less than 12 months then any gains are taxed as ‘ordinary income’, if you sell after a year then any profits are taxed as ‘long-term capital gains’. At the time of writing this is 28%.
Also read: Should i buy gold or silver?
This means that you will only pay CGT when you sell your gold and silver bullion, rather than at the point of investment.
Buy CGT-free gold
However, the IRS does not consider coins that are used as legal tender in the US to be ‘collectibles’ such as American Eagles.
Any coin produced in accordance with state legislation is also exempt. A specified fineness of gold or silver bullion is also not a collectible. The bullion or coins must be in the actual ownership of a bank or an authorised non-bank trustee in order to be eligible for the exemption.
Do I pay CGT on the gold in my IRA?
If a non-exempt collectible is purchased with IRA funds, the whole purchase price is deducted from the owner's gross income at the time of the transaction, and there is a penalty for each year that the investment remains in the IRA. The money invested in the collectible is also subject to the 10% early distribution penalty if the owner is under the age of 59-and-a-half, unless they are eligible for an exception.
When investing in gold, how can I reduce my CGT liability?
it is worth keeping the following in mind:
- You only pay Capital Gains Tax on gold on gains above that particular tax year’s CGT threshold.
- CGT is only due on any gains made, not on the total amount the gold bullion was sold for. This is referred to as ‘net capital gain’
- If you incurred any (eligible) losses in previous years then you are able to carry them forward and offset them against any gains.
- If you are married and share the asset, then you can combine your CGT allowance.
It is your responsibility as an investor to declare any CGT payable. GoldCore is not a tax advisory service and would recommend consulting with a tax expert prior to making any investment decisions based on tax liabilities.
Also Read: How to invest in Gold Coins?
