Over the past 10 years, gold price more than doubled. Amid concerns about the economy, concerns about market volatility and geopolitical instability, demand for the precious metal has increased significantly. investment in gold is becoming more and more popular.
However, if you are interested, gold is a good investmentFirst of all, you need to understand that this is different from investing in traditional securities such as stocks or bonds. And one of the key differences is how gold is taxed; if you’re not prepared, those taxes could be an expensive surprise.
Types of investments in gold
There are many different ways to invest in gold. How gold is taxed depends on the type of investment you choose: physical gold, gold held in an individual retirement account (IRA), also known as gold IRAs – shares of gold mining companies, gold-backed mutual funds, or exchange-traded funds (ETFs).
1. Physical gold
When thinking about investing in gold, many people immediately think of physical gold coins or gold bars. But physical gold has some unique features from a tax perspective.
When you buy or sell any asset, you must pay taxes on your profits—capital gains on the assets. However, the Internal Revenue Service (IRS) classifies all gold, including bars, coins, rounds, ingots, and ingots, as “collectibles.” Thus, capital gains in gold are taxed at a different rate than other assets.
For gold held for a year or less, you pay your regular income tax rate. However, gold held for more than a year is taxed at the maximum long-term capital gains rate of 28%.
If you earn less than $182,100 a year as a single taxpayer, this tax rate means you pay a higher than normal rate on capital gains. In contrast, those with high incomes and higher tax brackets may actually benefit from this tax rate; 28% is lower than what they would pay on their income.
Your capital gains from gold must be reported. Form 8949Sales and other dispositions of capital assets for the tax year in which you sold your physical gold.
2. Gold IRAs
Gold held in an IRA is taxed very differently than physical gold that you own yourself. That’s because gold IRAs are a type of self-directed IRA—or SDIRA—that allows account holders to invest in alternative assets such as gold and other precious metals.
To qualify, the gold in the IRA must meet IRS purity standards and the gold must be held in an authorized storage facility, such as an approved custodian.
Gold IRAs have the same tax benefits as regular IRAs. Companies providing best gold IRAs Typically offer both traditional and Roth options:
- Traditional Gold IRA: With a traditional gold IRA, you contribute pre-tax dollars and the assets can grow tax deferred. Once you retire—assuming you’re age 59½ or older—you’ll be taxed at your ordinary income tax rate. If you withdraw money before this age, you will pay income taxes as well as a 10% penalty.
- Roth Gold IRA: Roth IRAs allow you to contribute with after-tax dollars. This way, once you reach retirement age, you can receive distributions tax-free.
Traditional gold IRAs are subject to required minimum distributions (RMD), which means you must withdraw a certain amount per year from your account once you turn 73 years old.
Additionally, SDIRAs, such as gold IRAs, count toward the annual IRA contribution limit. So if you have a traditional brokerage IRA, keep in mind that a gold IRA will also count toward the annual limit. In 2025, the annual contribution limit for an IRA will be $7,000 for those under age 50 or $8,000 for those age 50 and older.
3. Stocks, mutual funds and ETFs in brokerage accounts.
Another option is to invest in gold by investing in related stocks, mutual funds and gold ETFs. These options allow you to invest in companies such as precious metals mining corporations and gold technology firms. You can invest in stocks, mutual funds and ETFs in retirement or brokerage accounts.
With a brokerage account, you must pay taxes when you sell your assets for a profit, receive interest payments, or receive dividends. The money in your account is taxed during the year it is earned (not when you withdraw it).
The length of time you hold the asset affects your tax rate. For long-term capital gains, you will be taxed at 0%, 15% or 20% depending on your income. For short-term capital gains, you’ll pay your regular income tax rate, ranging from 10% to 37%.
Minimizing taxes on investments in gold
Although gold is taxed differently depending on the type of investment, there are several strategies you can use to minimize your tax liability.
Keep for the long term
The largest tax charges apply to short-term investments in gold. If possible, hold onto your gold for at least a full year to avoid having to pay short-term capital gains taxes.
Use tax-advantaged accounts
Taxable brokerage accounts and investments in physical gold do not have any tax benefits. However, gold IRAs do this. Depending on the type of IRA you choose, you may qualify for benefits such as tax-deferred growth or tax-free distributions in retirement.
Consult a tax professional
To make sure you’re prepared for tax season (and long-term tax planning), consult a tax professional, such as a certified public accountant (CPA). A CPA can review your options with you and help you choose the right accounts to optimize your tax strategy.
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