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3 Tax Advantages of Investing In Gold

By    |   Thursday, 02 July 2015 12:23 PM

People considering changes to or starting an investment portfolio often wonder about buying gold. Gold is considered a hedge against inflation because it holds its value, unlike currency-backed assets. Managing the taxation of a gold investment might take certain strategies.

There may be good reasons for buying physical gold, such as a hedge against financial disaster or the desire to own the metal, but buying the physical metal is not a good way to realize a tax advantage. Physical gold and gold ETFs that are not held in an IRA are taxed as a collectible, according to Investopedia. Collectibles held for one year or less are taxed as ordinary income. If you sell the physical gold or gold ETF after one year, it’s taxed as income with a maximum rate of 28 percent, substantially higher than the 15 percent on long-term capital gains.

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The more tax-advantaged ways to invest in gold are through those instruments that allow you to take advantage of long-term capital gains tax rates. Here are three ways to invest in gold and the tax considerations for each.

1. Individual Retirement Account
An individual retirement account (IRA)
will allow you to purchase and hold gold. The tax rate for the account is like any other IRA, much lower than the tax rate of gold as a collectible, according to the Journal of Accountancy. When investing in a gold IRA, there are usually fees for storage and administration.

2. Exchange-Traded Funds
Another option is to invest in gold without buying physical gold. This can be done through investment in gold exchange-traded funds (ETFs), gold mutual funds or gold mining stocks. They may yield lower pre-tax returns, but the after-tax rate may make them a good investment. When held for one year, they are taxed at the long-term capital gains rate.

3. Closed-End Fund
These funds often price gold stocks at a discount, according to Forbes. A closed-end fund is similar to mutual funds or ETFs that pool money from investors. Unlike other funds, there is a set amount of shares available. The price of mutual funds and ETFs generally remain according to the net asset value of the fund commodity. Closed-end funds can fluctuate and be discounted or sold at a premium. The returns on the fund are taxed at long-term capital gains rates when held for at least one year.

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People considering changes to or starting an investment portfolio often wonder about buying gold. Gold is considered a hedge against inflation because it holds its value, unlike currency-backed assets. Managing the taxation of a gold investment might take certain strategies.
gold, investing, tax advantages
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2015-23-02
Thursday, 02 July 2015 12:23 PM
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