The Tax Implications of Holding Gold and Precious Metals

March 31, 2025
The Tax Implications of Holding Gold and Precious Metals

Introduction

Investing in gold and other precious metals is a popular strategy for wealth preservation and inflation protection. However, these assets are subject to specific tax regulations, which vary based on how they are held, bought, and sold. The IRS and CRA classify precious metals differently from stocks and bonds, meaning investors must understand their capital gains treatment, reporting requirements, and tax-efficient strategies.

 

This article explores the tax implications of holding gold and precious metals, including how gains are taxed, reporting rules, and ways to minimize tax liability.

 

1. How Gold and Precious Metals Are Taxed

a) Tax Classification in the U.S. (IRS Rules)

  • Gold and silver bullion, coins, and ETFs are classified as "collectibles" under IRS tax rules.
  • Long-term capital gains (held >1 year) on collectibles are taxed at a maximum rate of 28% (instead of the standard capital gains rates of 0%, 15%, or 20%).
  • Short-term capital gains (held ≤1 year) are taxed as ordinary income (up to 37%).

b) Tax Classification in Canada (CRA Rules)

  • The Canada Revenue Agency (CRA) taxes gold and precious metals as capital assets.
  • 50% of capital gains from selling gold and other metals are taxable at the investor’s marginal tax rate.
  • If gold is considered business inventory (for dealers or traders), it is taxed as business income rather than capital gains.

 

2. Tax Implications Based on How Gold Is Held

a) Physical Gold and Bullion

  • Taxed as collectibles in the U.S. with a 28% long-term capital gains rate.
  • If sold for a profit, investors must report capital gains on Schedule D (Form 1040).
  • FBAR & FATCA Reporting: If stored in a foreign vault and the value exceeds $10,000 (FBAR) or $50,000 (FATCA), U.S. taxpayers may need to file FinCEN Form 114 (FBAR) or Form 8938 (FATCA reporting).

b) Gold ETFs (Exchange-Traded Funds)

  • In the U.S., gold ETFs structured as grantor trusts (e.g., SPDR Gold Shares - GLD) are taxed at collectibles rates (28%).
  • Some gold ETFs structured as mutual funds (e.g., gold mining ETFs) qualify for standard capital gains tax rates (0%, 15%, or 20%).
  • Canadian-listed gold ETFs are taxed at standard capital gains rates.

c) Gold Held in Retirement Accounts

  • U.S. Investors:
    • Gold investments inside a Self-Directed IRA (SDIRA) grow tax-deferred (Traditional IRA) or tax-free (Roth IRA).
    • Only IRS-approved gold (e.g., American Gold Eagles, Canadian Maple Leafs) can be held in IRAs.
  • Canadian Investors:
    • Gold and silver bullion are not allowed in RRSPs or TFSAs, but mining stocks and ETFs can be held in these accounts.

 

3. Reporting Requirements for Gold Investments

a) U.S. (IRS Reporting Rules)

  • Selling gold for a profit requires reporting on Schedule D (Form 1040).
  • Dealers report sales of certain gold items on Form 1099-B, which the IRS uses to track taxable transactions.
  • Foreign gold storage exceeding $10,000 must be reported on an FBAR (FinCEN Form 114).

b) Canada (CRA Reporting Rules)

  • Gold sales exceeding $200 CAD must be reported as capital gains.
  • Gold purchases and sales may be subject to GST/HST in Canada if part of a commercial activity.

 

4. Strategies to Minimize Taxes on Gold Investments

  • Hold gold for more than a year to avoid short-term capital gains taxes.
  • Use tax-advantaged accounts like IRAs (U.S.) or RRSPs (Canada) for gold-related stocks or ETFs.
  • Keep records of purchase prices and transaction dates to accurately report capital gains or losses.
  • Consider gold mining stocks or mutual funds that qualify for standard capital gains tax rates instead of collectibles rates.

 

5. Tax Implications of Inherited or Gifted Gold

  • U.S.:
    • Inherited gold receives a step-up in basis, meaning heirs only pay tax on gains from the value at inheritance, not the original purchase price.
    • Gifted gold over $18,000 (2025 exemption limit) is subject to gift tax rules.
  • Canada:
    • Inherited gold is taxed as a deemed disposition, meaning capital gains may be triggered at the time of transfer.

 

Conclusion

Gold and precious metals offer inflation protection and portfolio diversification, but they come with unique tax implications. In the U.S., gold is taxed as a collectible with a higher long-term capital gains tax rate of 28%, while in Canada, gold is subject to standard capital gains tax rules. Understanding reporting requirements, tax-efficient investment strategies, and compliance rules is essential to maximizing after-tax returns. 

 

Tax Partners can assist investors in structuring their gold investments for tax efficiency while ensuring full IRS and CRA compliance.

 

This article is written for educational purposes.

 

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

 

Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.

 

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