05/23/2024 02:09:08 PM

When you’re dealing with money, the taxman is always involved. So, even though precious metals are an alternative store of value, an investment in them guarantees that you will have to deal with tax considerations.

Because precious metals are their own thing, though, there are some quirks when handling taxes on them. This page is your guide to how taxes work when you start stacking gold, silver, palladium, platinum, copper, or whatever type of precious metal is your favorite.

1 oz Gold Bars


The fundamental rules

Before we discuss the particulars of taxes concerning precious metals, it’s important to understand when a tax may come into play with your investment.

When you buy a precious metal piece, your only tax liability is the sales tax you pay within your state for most purchases. So, expect that markup to come into play for the purchase price.

Once you own precious metals, you are not liable to be taxed on your possession of them until you sell them. Before a sale, you haven’t realized any profits from your ownership, so there’s nothing to tax. Furthermore, the value of metals fluctuates while owned, making it difficult to determine a consistent percentage-based tax.

Finally, you need to understand that any taxes you owe when you sell your metals only apply to the profits from the sale, not the entire value of the sale. In other words, the amount you paid to get the metals in the first place will not be taxed at this time.

Does the IRS consider precious metals to be taxable?

Sadly, yes. While we’d all hope for a favorable stance from the Internal Revenue Service on precious metal investments, the reality is that the IRS considers precious metals to be collectibles under the current tax code.

Collectibles are a subset of items known as capital assets. Capital assets are any type of object owned with the idea that they are generating revenue for you or will do so in the future. As such, they are subject to capital gains tax – the same type of tax that attaches to your stock sales, bond maturities, and other more traditional investments.

Capital gains tax rates are calculated according to the tax rate you pay on the rest of your income. The only x-factor is how long you’ve owned your gold, silver, or other precious metals.

For metals owned for less than a year, you’ll simply pay taxes on their sales at the same progressive rates that govern your regular income. For sales of metal owned for longer than a year, you will be taxed at your marginal tax rate – the rate charged on your highest dollar of regular income.

However, there is some good news. The tax code caps the marginal tax rate at which your precious metals can be taxed at 28%. So, if your marginal tax rate is higher than 28%, you will save the difference between the two rates on your metal sales.

What if the gold was a gift?

We can’t think of a better present than gold, silver, or some other precious metal. However, if you attempt to sell your newfound metals, there are some tax implications.

The fundamental rules mentioned above apply here, too – you’ll only be taxed for the profits that you realize from the sale. However, since you never put forth the money to buy the metals in the first place, the government uses a different valuation to assess the underlying investment in the metal and – by extension – the amount of profit you get.

This valuation is known as the cost basis for the metal. The cost basis is simply the market value of the metal on the date that you received it into your possession.

I inherited some silver – will I be taxed?

Yes – if you try to sell it. So long as you hold onto the metal you received as part of an inheritance, you owe nothing.

The same rules above apply when you go to sell, though. The government will figure out the cost basis and tax the profits from the sale according to the tax code.

The only difference is that the cost basis is calculated based on the market value of the metal on the date of the previous owner’s passing. It may seem a tad icky, but it’s the only logical date to choose.

What if I sell my metal at a lower price than when I bought it?

In our opinion, precious metals – gold and silver, especially – are likely to continue to rise in value. However, it is always possible that their value may go in the other direction, and the sale of your metal results in a loss to you.

There are tax considerations in this situation, too. However, since you incurred a loss, you can use the value of the loss to reduce your taxable income. In essence, since you lost money, you didn’t make as much money as your regular income would indicate, and you should owe a lesser amount to the IRS (and your state, depending on where you live).

If you did or are expecting to take a loss and want to use this offset, though, we recommend you hire an accountant. It’s not quite as straightforward as paying taxes on profits.

How to pay

If you’ve determined that you owe taxes on a recent sale of your precious metals, you’ll need to report the earnings along with the rest of your income. Because it’s the IRS, there are two forms that you’ll need to complete.

First, report the details of the sale itself on IRS Form 8949. Then, use your 1040’s Schedule D to add the profit to your capital assets report.


Though we are confident about the accuracy of the information we’ve provided, we do have to mention that BGASC is not an expert organization for taxes. If you have any further questions or concerns about the tax implications of precious metals investing, your best bet is to reach out to a tax professional. This page is strictly for informational purposes and is not meant to be official advice.