What precious metals are tax free?

Precious metals are taxable in most countries because of their high economic value. In most countries, capital gains tax applies when precious metals are sold at a profit. Some countries also apply value added tax to precious metals. Many investors prefer to own physical gold and silver rather than exchange-traded funds (ETFs) that invest in these precious metals.

With the prevalence of online precious metals merchants these days, people often wonder if they are required to pay taxes on precious metal sales, especially purchases made online. The amount of taxes due on the sale of precious metals depends on the basis of the cost of the metals themselves. This means that people in the 33%, 35% and 39.6% tax brackets only have to pay 28% for their physical sales of precious metals. The Internal Revenue Service (IRS) considers that physical holds of precious metals such as gold, silver, platinum, palladium and titanium are capital assets specifically classified as collectibles.

While the idea that purchases of gold, silver and other precious metals are considered an investment and therefore not subject to sales tax seems to be gaining ground, many states continue to levy taxes on sales of precious metals. The proposed law defines “precious metal ingots” as “coins, bars, or rounds minted primarily of gold, silver, or other precious metal that are refined and (i) marked and valued for their weight, purity and content or (ii) minted by a government authority. The crux of the matter is whether gold, silver and precious metals should be considered an investment or even a currency, or if they are simply like any other physical property, such as clothing, cars, or furniture. In addition, with the advent of electronic payment services, it is easier than ever to use precious metals in everyday transactions.

First, if you receive the metals as a gift, the cost basis is equal to the market value of the metals on the date the person who gifted them purchased them. The only states that continue to charge taxes on the sale of precious metal ingots are Vermont, New Jersey, Maine, Tennessee, Kentucky, Wisconsin, New Mexico, Mississippi and Hawaii. The legislation would exempt the sale of certain investment metal ingots and coins from sales and use tax. While many marketable financial securities, such as stocks, mutual funds and ETFs, are subject to short-term or long-term capital gains tax rates, the sale of physical precious metals is taxed slightly differently.

Ron Paul said during a testimony in support of an Arizona bill that would repeal capital gains taxes on gold and silver in that state.

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