Before purchasing silver rounds or bars, it is important to consider the tax ramifications of this investment strategy. There may be taxes due both at the time of purchase – in the form of sales tax – and when you sell off your investment, at which point the profit may be considered income. There is a lot of confusion regarding the taxes due, as well as potential strategies to avoid taxes.
When buying silver rounds or coins, you may be charged sales tax. These laws vary from state to state. Some states charge sales taxes for purchases of precious metal bullion, while in other states, such purchases are exempt from the tax. In some states, there are minimum purchase requirements in order to qualify for this tax exemption; it may also be restricted to certain types of silver bullion. If you are responsible for sales tax when buying silver rounds, know that it can add as much as 9% to the purchase price, depending on the state in which you live.
Ways to Avoid Paying Sales Tax
Before buying silver bullion, look into your state’s sales tax laws as they relate to precious metal bullion. By understanding your state’s sales tax laws, you may be able to reduce your sales tax liability. For example, you may be able to purchase in larger quantities or select certain types of silver bullion which qualify for a tax exemption.
Some silver investors buy their silver online from an out-of-state dealer in order to avoid sales taxes. The seller’s home state dictates whether they must collect sales tax; most online silver dealers are based in states that do not charge taxes for precious metal sales, making buying from such sites one way to avoid paying sales taxes when buying silver.
Understanding Capital Gains Tax
When you sell your silver coins or rounds, the sale price – minus the initial cost of purchasing the silver – is considered to be a capital gain. Thus, it is subject to capital gains tax, which may be as much as 28% of the profit. As the seller, you must report this to the IRS on Form 1040 Schedule D. If you have sold your silver to a professional dealer, they may file IRS Form 1099-B, but regardless of whether they are required to file this form, you are still obligated to pay the capital gains tax.
Tax Advantages of a Silver IRA
You may be able to reduce the capital gains tax due by investing in silver through a silver IRA. An Individual Retirement Account can be used to purchase silver rounds as a way of saving for retirement. There may be tax advantages to this form of silver investment. Consult with a tax advisor to determine whether a silver IRA may be a good option for you
The regulations regarding taxes for silver round purchases and sales can certainly be confusing. Before you begin investing in silver rounds, it is important to be sure you understand the tax implications of this investment decision.