Since we just finished tax season, many first-time gold investors might wonder what to do about their precious metals holdings. How are they taxed, and are there any legal ways to lessen those taxes?
Precious metals like gold, silver, and platinum are considered capital assets, so you will have to pay capital gains taxes when you sell them for a profit.
For almost any asset class, the amount of time you hold them plays an important role in how much you pay in taxes.
Short-term capital gains are taxed differently than long-term capital gains—in fact, the difference can be quite substantial.
In 2016, the rates for long-term capital gains were 0%, 15%, and 20% for most investments, whereas short-term gains are taxed on your ordinary income tax rate. A potentially huge savings for smart investors.
Gold, on the other hand, is treated somewhat differently.
The bad news: The IRS classifies precious metals as collectibles and taxes them at the long-term capital gains rate of 28% for high-income earners and even more for the highest earners, who have to pay a net investment income tax.
The reason is the US government doesn’t consider gold to be a “productive” investment in the sense that it increases gross domestic product. It would rather you put your money into stocks and bonds. So, in the eyes of the IRS, gold is the proverbial red-headed stepchild.
The good news: Investors who purchase gold through retirement accounts can substantially reduce their tax liability, if not eliminate it altogether.
An IRA allows you to buy gold with pre- or post-tax dollars. And once you start making withdrawals, whether in gold or cash, they will be taxed at your ordinary income tax rate if coming from a traditional IRA or not at all in a Roth IRA.
But how? Conventional retirement accounts such as 401(k)s or 403(b)s don’t allow physical gold to be bought and stored.
The easiest way to earn a tax-deferred status for your gold holdings is to open a designated gold IRA with a reliable precious metals dealer and administrator.
The Hard Assets Alliance offers a unique gold IRA, making it very simple to invest and store precious metals for your “golden nest egg.”
Gold provides true diversification in a retirement portfolio, limiting your exposure to market volatility and corrections. Its price moves independently of stocks and many fixed-income investments, and it makes for an ideal inflation and crisis hedge.
Unlike other gold IRAs, which involve many players and a rather complicated process, the Hard Assets Alliance gold IRA makes it easy to open an account and manage it from one site.
It seamlessly combines an online custodial account, access to HAA’s vast network of bullion dealers, private non-bank domestic and international storage options, and an ultra-secure purchasing platform. Thanks to this revolutionary model, your ease of use and convenience are guaranteed.
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