Silver, Gold and Taxes (in the United States)
Please note, tax laws are very complex, and change frequently. Therefore, this information may be inaccurate or outdated (but to the best of our knowledge is not).Also see our Truth About the 28% Tax page. In the United States, the tax you pay may be a lot less than you expect, and rarely 28%.
When Buying Silver or Gold
In the United States, there is no GST, VAT, national tax or the like. The only tax that you might pay is state sales tax, depending on which state you live in. In states with sales tax that covers bullion, purchases over a certain amount are normally exempt (just check with your local dealer to find out). If you live in a state with sales tax, and order online from an out-of-state company, the company will likely not charge you sales tax (but you will likely be expected to pay 'use tax' to your state).When buying silver or gold, you need to keep track of what you bought and when (so that you can report the capital gains or loss, as mentioned later).
When Selling Silver or Gold
When selling, you will pay federal tax if you receive more than you original paid. As of this writing, gold, silver, and platinum bullion (and any type of coins) are treated as collectibles. That means that gains (your "profit") are usually treated as income, and but if it is a long-term gain the maximum rate would be 28% (it gets reported on the 1040 Schedule D).The price that you original paid (including any commissions, fees, etc.) is normally your 'basis', which is used to determine if you made a gain or a loss. If you sell for more than that, you pay the 28% capital gains rate (however, if you would have a lower tax rate if the capital gains were treated as income, that lower rate will apply). Also, if the gain is short-term (you bought it less than 1 year before selling it), you are taxed at your normal income tax rate.
Note that you may need to file estimated taxes after you sell bullion. This is typically the case if you end up owing the IRS at least $1,000 after withholdings are accounted for.
Sales Tax
Some states require that you pay sales tax on bullion purchases, often only under a certain amount (e.g. purchases under $500).We were going to research which states collect sales tax on bullion, but The Coinologist already did. Thank you!
Summary of states that do collect sales tax on bullion: Alabama, Arkansas, Washington DC, Hawaii, Indiana, Kansas, Kentucky, Maine, Minnesota, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Tennessee, Vermont, Virginia, West Virginia, Wisconsin, Wyoming.
Summary of states that do not collect sales tax on bullion: Arizona, Delaware, Georgia, Idaho, Illinois, Iowa, Michigan, Mississippi, Missouri, North Dakota, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, Washington
Summary of states that do collect sales tax on bullion, but have exemptions over a certain amount: California ($1,500), Connecticut ($1,000), Florida ($500), Louisiana ($1,000), Maryland ($1,000), Massachusetts ($1,000), New York ($1,000), Texas ($1,000).
Summary of states that vary based on city or county (no state tax): Alaska, Montana, Colorado.
| Arizona | Not taxed | 42-5061(A)(21) |
| California | Taxed up to $1,500 | South African coins are always taxed (e.g. Krugerrands). California Gold medallions are not taxed. Regulation 1599. |
| Connecticut | Taxed up to $1,000 | Conn. Gen. Stat. § 12-412(45). |
| Florida | Taxed under $500 | 212.08 (7)(ww) |
| Georgia | Not taxed | Title 48, Section 48-8-3 (66) |
| Idaho | Not taxed | Title 63 Chapter 36 (63-3622V) |
| Indiana | Taxed | Information Bulletin #50, December 2002. |
| Kansas | Taxed. | Regulation Number 92-19-56 |
| Louisiana | Taxed up to $1,000 | RS 47:301 Chapter 2 Section 301 (16)(b)(ii) |
| Massachusetts | Taxed up to $1,000 | Chapter 64H Section 6 (ll) |
| Missouri | Not Taxed. | Chapter 144 Section 144.815 |
| New York | Taxed up to $1,000 | Section 1115(a)(27) |
| North Dakota | Not taxed | 57-39.2-04.31 |
| Oklahoma | Taxed | 710:65-13-95 exempts bullion stored at a recognized depository. |
| Rhode Island | Not taxed | Title 44, Chapters 18-19, |
| South Carolina | Not taxed | Section 12-36-2120 (70)(a) |
| South Dakota | Not taxed | 10-45-110 |
| Tennessee | Taxed | Attorney General Opinion #12-110, December 2012. |
| Washington | Not Taxed | WAC 458-20-248 |
| Wisconsin | Taxed | Tax 11.78 (1)(g) |
Tax Fraud
Many people in forums state that they do not or will not pay tax when selling their silver or gold.Worse, many people also go to great lengths to not "leave a paper trail" -- in other words, they don't get receipts for their purchases (presuambly because they expect not to pay taxes later). Once, I made a trade with a well known bullion dealer at a coin show; while I was waiting, I saw him make a trade with another dealer and print a receipt. But for my trade, he was not expecting to give me a receipt. It was clear that customers more often than not do not want paperwork.
However, you should think carefully before doing this. Tax fraud can have serious consequences: [1] In rare cases, you could go to jail; [2] the penalties for tax fraud are higher than for negligence; [3] the normal 3-year statute of limitations goes away (normally, 3 years after a return is filed, the IRS cannot change it).
So if you hide gains from silver sales for decades, and one of your recent returns gets audited, you could end up owing an astronomical amount. Normally, the IRS can only look at returns for 3 years. But if they discover fraud, they can go back as far as the fraud does. So you may end up owing taxes, penalties, and interest on all the gains for all the years.
For those that think they will not get caught, one of the standard questions that auditors ask during an audit is whether or not you keep money in a hidden location (such as a safe) [see here]. No matter what you answer, if you buy a lot of things with cash, they will need to see where the money is coming from (and if you lie about having hidden cash, it helps the fraud case).
Also, many people somehow believe that not having a receipt for making a silver purchase would benefit them (perhaps they are envisioning a team of government agents tearing through their house looking for receipts, which only happens in movies and to those wearing tin foil hats). The government doesn't care if you purchased silver, only if you reported any gains. If you did sell silver, and get audited, you'll need to have the receipt from purchasing it to prove what you gain (or loss) is. Without the receipt, you could be at the mercy of the IRS.
What Else Should I Know?
- There are certain reporting requirements that dealers may need to handle, so it is possible that the IRS may know about sales of bullion.
- It is very important to keep track of your purchases (and any trades you may make). If you do not, when you sell you may find that you cannot determine what your gain was. In that case, you may need to report your basis as 0, and you could end up paying more taxes than your gain!
- Barter is taxed. So if you paid $500 each for 4 1-ounce U.S. gold eagles ($2,000 total), and then later buy a used car worth $4,000 for those same 4 eagles (now worth $1,000 each), the IRS considers it the same as having sold them. As such, you would need to report a capital gain of $2,000 (the difference between the $4,000 value and the $2,000 basis).
- For taxes, you cannot treat gold or silver coins at their face value (Frivolous Position #13). In the barter example above, the seller could not claim that he sold his car for $200 (the face value of those gold eagles). This may result in a $5,000 'frivolous return' penalty!
- You cannot claim that gains on gold or silver aren't taxable since gold or silver preserve value, and protect against the decline of fiat currency. See Frivolous Argument #15 here.
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