Gold jewelry can be freely owned and held by individuals in the United States without any licensing or restrictions of any kind. People can freely buy and sell gold jewelry within U.S., and just like any other capital asset, taxes need to be paid on the sale of gold jewelry only if you make a profit. In this blog, get more specific details on when your gold jewelry must be reported on your income tax return and what are your tax implications when you buy or sell gold jewelry.
Tax Implications :
The Internal Revenue Service (IRS), the nation's tax collection agency, classifies precious metals, including gold jewelry, as collectibles, like art and antiques. You pay taxes on selling gold jewelry only if you make a profit. For tax purposes, selling gold jewelry is much like selling other capital assets in that you end up with a capital gain or loss. Capital gains on collectibles, including gold jewelry, are taxed at 28 percent. Here is how you calculate the amount of tax you owe on the proceeds of selling gold jewelry- you take what the item is worth at current fair market value minus the price you originally paid for the jewelry. If the gold jewelry you are selling was a gift, your basis is calculated on what the gift-giver paid for the jewelry. If you inherited the gold jewelry you're selling, your basis is the current fair market value at the time of inheritance as determined by an appraiser. For example, if you paid $100 for a gold chain and later sold it for $200, your capital gain is $100, and you will owe $28 in taxes.
In the case of inherited or gifted gold jewelry, at the time that you inherited the items, the fair market value (FMV) becomes your cost basis which is the dollar amount used to determine a profit or loss from the sale. So for example: you inherited 3 gold rings and 2 gold necklaces which hold a fair market value, at the time of inheritance, of $2,000 You approach a store and they offer you $1,700 for all 5 items you do not get any income from this transaction since the FMV was $2,000 and you sold the items for less than the fair market value. But if you sell the items for $2,200 you must recognize the income of $200. Now from this profit, you are allowed to remove any costs that are directly related to the sale like appraisal, ebay fees, shipping fees etc. Then report this income with the IRS and pay a 28 percent tax on the final amount.
Take a peek at our 22K Gold Jewelry Collection:
When you sell gold jewelry overseas, the laws of the country in which you sell will apply to the sale. When you sell precious metals/stones in the U.S., for a profit, you are required by U.S. law to report that profit on your income tax return, regardless of whether or not the dealer has any reporting obligation.
When you buy gold jewelry the transaction is almost always private. There is no reporting requirement from a gold dealer to the IRS of what is sold to you, unless BOTH of the following conditions exist:
1. The transaction(s) exceed $10,000; AND
2. Actual cash (or money orders, bank or certified checks, etc.) is used to make the purchase(s). In this event, the dealer would be required to file a Form 8300 with the IRS.
How to Report Gain/ Loss:
Use IRS Schedule D of Form 1040 to report your capital gains earnings from the sale of gold jewelry. If you owned the gold for more than one year, it is a long-term capital gain and subject to the 28 percent collectibles capital gains tax rate. If you owned the gold jewelry for one year or less, you have a short-term gain. Short-term gains are taxed at the ordinary income tax rates that apply to other income such as wages. You can report any loss from selling gold jewelry on Schedule D and use it as a tax deduction. You may deduct expenses associated with the sale of the gold jewelry, such as dealer commissions and appraisals.
As most good accountants will tell you, investment decisions should never be made based solely on tax considerations. Taxes are an expense, not a cost. You only pay them when you first make a profit. Most people prefer to buy and own 22K gold jewelry because it is one of the most effective investment we know against political and monetary risks, from basic inflation to severe market crashes. Providing your portfolio with that protection is far more important than what your tax liability might be.
PLEASE NOTE : this blog is ONLY for information for our readers. This is not actual legal or tax advice. We would suggest checking with a tax professional if you have additional questions.