Precious metals can be an important hedge against risk in your portfolio, but they don’t come without costs. Many investors assume gold and silver are taxed the same way as stocks and bonds, but the IRS classifies these assets differently.
When it comes to selling metals, this can make a serious impact on how much profit you take home. In fact, because the IRS classifies most precious metals as collectibles, any gains you earn on these goods can be taxed as high as 28%.
Here’s how much you can expect to pay based on your income level, how long you’ve held the investment and the type of account it’s in.
Precious Metals Aren’t Taxed the Same as Stocks
Gold and silver are not taxed the same as stocks. Capital gains on stocks are usually taxed at a rate of either 0%, 15% or 20%, depending on your taxable income.
On the other hand, the IRS taxes precious metals as collectibles in most cases. This means that gains are taxed at your marginal tax rate, with a capped rate of 28%. But remember: You only pay taxes on capital gains when you sell your holdings.
That said, capital gains on both stocks and precious metals are taxed like ordinary income if you’ve owned them for a year or less.
What the IRS Taxes as Collectibles
According to IRS tax rules, collectibles include metals, coins, gems and other tangible items of value, like works of art or antiques. This means that most types and forms of precious metals are taxed at the same rate, including both bars and coins of silver, gold, platinum and palladium.
However, some forms of precious metals are not considered collectibles, including certain coins, some bullion in IRAs and non-physically backed ETFs. These holdings have their own tax rules.
Why the IRS Taxes Precious Metals as Collectibles
In general, the U.S. government taxes precious metals higher than it taxes investments like stocks and bonds. According to economist Purba Mukerji of Connecticut College, this is intentional: “The tax code is designed to encourage people to hold their savings in the form of U.S. dollars instead of holding potential rivals like precious metals,” she says.
What Tax Rate Will You Pay on Gold and Silver Gains?
The 28% collectibles tax rate is a maximum rate, not necessarily the rate you’ll pay. If your ordinary income tax rate is lower than 28%, your precious metals gains are generally taxed at that lower rate.
“For example, if a taxpayer’s marginal tax rate is 22%, they would pay tax at their marginal rate,” says Eliot Bassin, accountant, financial planner and partner at Fiondella, Milone & LaSaracina LLP.
For example, if you bought gold for $1,000 and later sold it for $2,000, your taxable gain would be $1,000. At a 22% tax rate, you would owe $220 in federal capital gains taxes. At the maximum 28% collectibles rate, you would owe $280.
Your exact tax bill depends on your income, holding period and whether any additional taxes, such as the Net Investment Income Tax (NIIT), apply.
Who Pays the 28% Tax Rate, and When?
You’ll only pay the 28% rate if your ordinary income tax rate would otherwise be higher than 28%. According to IRS guidelines, that generally only applies to single earners making more than $201,775 per year, or married couples filing together making more than $403,550 per year.
Additionally, you only pay taxes on realized capital gains, meaning you pay taxes on your earnings only when you actually sell your silver, gold or other precious metals at a profit.
Who Pays the Net Investment Income Tax?
High-earning investors may also owe the 3.8% Net Investment Income Tax (NIIT) on precious metal gains. This usually applies if your modified adjusted gross income exceeds $200,000 as an individual or $250,000 as a married couple filing jointly. In these cases, the gain from selling your precious metals can trigger the additional tax on top of the existing 28% collectibles capital gains rate.
How Does the IRS Know If You Sell Gold?
The IRS may learn about precious metal sales in several ways. Some precious metal dealers are required to file information returns with the IRS for certain transactions that meet specific reporting thresholds. If you sell through a brokerage account, such as a gold or silver ETF, the transaction may also be reported on tax forms sent to both you and the IRS.
However, not every precious metal sale is automatically reported. Regardless of whether a transaction is reported by a dealer or financial institution, taxpayers are responsible for accurately reporting any taxable gains on their federal income tax return.
Short-Term vs. Long-Term Capital Gains
How long you’ve owned your precious metals can have a significant impact on your tax bill. The 28% collectibles tax rate only applies to long-term gains, meaning gains on metals you’ve held for more than one year.
If you sell gold, silver or other precious metals after owning them for one year or less, any profit is considered a short-term capital gain and is taxed as ordinary income.
For example, if you bought $1,000 worth of gold and sold it 10 years later for $2,000, you would have a $1,000 long-term capital gain. Because physical gold is generally treated as a collectible, that gain would be taxed at your marginal tax rate, up to a maximum rate of 28%.
If you were subject to the full 28% collectibles rate, you could owe up to $280 in federal taxes on that $1,000 gain. Investors in lower tax brackets may pay less.
This example does not account for state taxes, transaction costs or the Net Investment Income Tax (NIIT), which may apply to some higher-income investors.
Tax Treatment of Gold and Silver ETFs
Gold and silver ETFs let investors trade precious metals on the stock market, without having to physically handle coins or bars. The IRS treats selling physically backed ETFs the same as selling the metal itself, meaning the 28% collectibles capital-gains rate cap still applies.
“Investors who think they sidestepped the collectibles rate by buying an ETF usually didn’t,” says Geoffrey Schmidt, CPA and financial educator specializing in retirement and tax strategy. “Funds like GLD and SLV hold physical metal, so the IRS treats selling your shares as selling the bullion itself.”
How Gold IRAs Are Taxed
Gold IRAs generally follow the same tax rules as other self-directed IRAs. Because the precious metals are held inside a tax-advantaged retirement account, investors typically do not pay capital gains taxes when the gold or silver is sold within the account.
Instead, taxation occurs when money is contributed to or withdrawn from the IRA, depending on the type of account. Contributions to a traditional gold IRA may be tax deductible and tax deferred, while withdrawals in retirement are generally taxed as ordinary income. Roth gold IRAs are funded with after-tax dollars, but qualified withdrawals in retirement are typically tax free.
As a result, investors can potentially avoid the 28% collectibles capital gains tax rate while assets remain inside the IRA, although standard IRA contribution limits, distribution rules and penalties still apply.
Tax Treatment of Precious Metals Losses
Like other capital assets, losses on investment-grade precious metals are generally tax deductible. Investors can use capital losses to offset capital gains from other investments, potentially reducing their overall tax liability.
For example, if you sell gold at a loss and also realize gains from stocks, mutual funds or other investments during the same year, the loss may help offset some or all of those gains. If your capital losses exceed your capital gains, you may be able to deduct a portion of the remaining loss against ordinary income and carry forward any unused losses to future tax years.
However, losses on items purchased primarily for personal use — such as gold jewelry, collectible coins or other personal possessions — are generally not tax deductible.
Sales Taxes on Gold and Silver Purchases
There is no federal sales tax on precious metals like gold and silver. Many states also offer full or partial sales tax exemptions for precious metal purchases. Although rules vary by state, these exemptions often apply to bullion coins, bars and rounds that meet certain purity or purchase-value requirements.
If your state does impose sales tax on precious metals, the tax is typically collected at the time of purchase and increases your upfront cost. This is separate from any capital gains taxes you may owe later if you sell your metals for a profit.
Before making a purchase, check your state’s current rules or ask your dealer whether sales tax applies to your transaction.
Capital Gains Tax FAQs
Do I always pay a 28% tax on gold gains?
No. Gains on precious metals are taxed at your marginal tax rate, with a cap of 28%.
Is gold taxed higher than stocks?
Yes, gold is usually taxed higher than stocks. Capital gains on gold can be taxed as high as 28%, while capital gains taxes on stocks only go as high as 20%.
Is silver taxed the same as gold?
Yes, the IRS taxes both silver and gold as collectibles.
Can I avoid capital gains taxes on gold?
Holding precious metals in a gold IRA offers some tax advantages. Investors can also work with a financial planner to help time sales and optimize strategies, like tax-loss harvesting, to reduce their tax burden.
What is the 6-year rule for capital gains tax?
There is no general U.S. federal capital gains tax rule that applies after six years of ownership. For precious metals, the key tax threshold is one year: holdings sold after more than one year qualify for long-term capital gains treatment, while holdings sold after one year or less are taxed as short-term gains. The IRS generally taxes physical gold and silver as collectibles, with long-term gains taxed at your marginal tax rate up to a maximum of 28%.
