Gold Tax Surprises

At Henssler Financial, we’ve long kept our stance that gold is a speculative investment. However, if investors are insistent on investing in gold, we have suggested exchange traded funds (ETFs) that invest in gold, rather than the shiny metal itself. Investing in a gold ETF generally, allows you to track the market price of gold; minimizes the commissions, and eliminates the security and storage issues that come with owning a 10-ounce gold bar.

However, one aspect of investing in gold we haven’t discussed is the taxes involved. The IRS considers gains from selling gold bullion as collectible gain. Long-term collectible gains/losses are taxed at your ordinary income rate, with a maximum tax rate of 28%. That is quite a difference from the current 15% tax rate most investors are paying on long-term stock gains. The 28% maximum collectibles tax rate also applies to ETFs that invest directly in gold. Some ETFs buy gold bullion, and investors are taxed as if they owned a portion of the collectible metal.

Additionally, if you are a Georgia state resident, you will likely have a 6% state tax on your gains.

Let’s say you bought a 10-ounce gold bar when it was selling for $250 an ounce. Your $2,500 investment is now selling for nearly $1,700 an ounce. If you were to sell, you have nearly $14,500 in gain that could be taxed at 28% by the IRS, 6% from the state of Georgia, and you likely would pay 10% commission to sell the gold bar—on top of the storage and security needed for the past 10 years!

That said, gold bullion ETFs, and certain gold coins or bullion that meet applicable fitness standards can be purchased in an IRA to side-step the collectible tax issue. However, we do not suggest considering such a speculative investment in accounts that are meant to fund your retirement.

At Henssler Financial we believe you should Live Ready, which includes understanding the tax implications of your investment choices.  If you have questions regarding your investments, the experts at Henssler Financial will be glad to help. You may call our experts at 770-429-9166, or e-mail at experts@henssler.com.

Disclosures

This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.