Did you know that in the New Deal, FDR called for a new tax program called the Revenue Act of 1935, which imposed an income tax of 79% on incomes over $5 million. This tax rate affected literally one person: John D. Rockefeller.
Anyone who pays taxes in the United States painfully knows just how complicated, expensive, annoying, and unfair the process truly is. Not just for fat cats like old Johnny Rockefeller but for ordinary people too.
How much more pleasant the world would be if taxes were a one page document, that you did once a year, and paid a simple flat percentage of your income. Keep dreaming right?
Well if that were the case then I wouldn’t have to be writing this post because yes, taxes are complicated, and as you’ll soon see very unfair, even when it comes to buying and selling something as simple as gold and silver investments.
As much as I highly recommend for every investor to have a secure stash of physical gold and silver close by, unfortunately this is the asset class where the IRS punishes you the most when selling.
Get this… any capital gains made from physical gold and silver bullion, along with numismatic coins, are taxed as collectibles which is a whopping 28%! And that’s just the federal government, who knows what every state is up to.
And to make matters even worse, if you hold your physical precious metals for less than a year, then the gain is taxed as ordinary income up to the maximum 35% federal rate! Astonishing!
Did you know this? And if you’re just finding out, how confused and upset do you feel right now? I know I was when I first discovered this clearly unfair, and in my opinion, unconstitutional tax policy.
Even though I am completely against a 28% tax on just about anything, at least with numismatic coins you could somewhat understand this heavy handed policy because they are in fact mostly bought and sold as collectibles.
But people don’t buy bullion coins, rounds, and bars as collectibles like stamps or rare works of art, and the IRS is fully aware of this, they buy them to protect themselves during tough economic times and more importantly to protect their wealth from being robbed by inflation!
You see gold and silver have proven themselves to be real money for thousands of years and that’s how they are still traded today.
Gold and silver are essentially currencies just like the Euro, yen, British Pound, and the US dollar. And government fiat currencies don’t like competing with other currencies, especially when you’re the world reserve currency like the US dollar.
So taxing gold and silver bullion as collectibles is a blatant attempt of our US government to undermine their value as currency and discourage people from buying them for investment purposes. In fact it’s a crime how US tax laws are manipulated to keep citizens from protecting their wealth and savings.
So I guess this is just another sad example of how responsible people who are trying to save their money, in a way that is resistant to inflation, are punished by unfair economic policies. This is flagrant economic engineering and as a gold and silver investor I find this policy insulting.
You try saving your money by putting it in a bank account and you’re robbed by inflation… then you try saving your money by storing it as gold and silver and now you’re robbed through taxation. Incredible!
I still keep a fair amount of physical gold and silver bullion for emergencies but this ridiculous tax policy is the main reason why I’ve change my investment strategy over the years.
How to Invest In Gold & Silver Without Being Aggressively Taxed?
1). Invest in mining stocks, options, futures, and precious metals-based mutual funds and ETFs.
Unlike physical gold and silver, this absurd “collectables” tax doesn’t apply to these assets and in most situations any capital gains and dividends are taxed at a much more palatable 15%.
2). Holding Gold and Silver Bullion in an IRA
Consult your tax professional but below are examples of the types of bullion that are allowed to be placed in an IRA:
- American Gold and Silver Eagle Coins
- Canadian Gold and Silver Maple Leaf Coins
- Gold and silver bars and rounds manufactured by a NYMEX or COMEX approved refiner.
3). Buy and Sell Your Physical Gold and Silver Anonymously
So what do you do with all the gold and silver you have hidden away in your secret stash? Well if it has to be used during a time of economic chaos or extreme social unrest, taxes will be the last thing on your mind and I wouldn’t worry about it.
But when gold and silver have reached all-time highs and you’re ready to start selling off your physical supply, there are ways of doing so that the IRS doesn’t have to know about.
First of all… do not make any cash purchases over $10,000. The reason being, precious metals dealers are required to report cash transactions over $10,000 by filing IRS Form 8300.
Also, do not make one or more cash purchases within 24 hours that total more than $10,000. The IRS deems this as suspicious activity and will want to know more about it.
It is possible to make a purchase over $10,000 without triggering notification to the IRS but if doing so, use a credit card, bitcoin, personal check, or bank wire transfer which dealers are not required to report.
However to play it safe and for complete anonymity without creating any kind of paper trail, keep transactions in person, in cash, and under $10,000.
Precious metals dealers are also required to issue an IRS 1099 tax form for certain transactions like when they buy back: 1,000 oz. or more of silver bars and/or rounds per transaction, 25 oz. or more of foreign gold coins, and 1 kilo or more of gold per transaction.
To avoid IRS notification, below is a list of 1099 exempt bullion products…
- American Gold and Silver Eagle Coins (less than 1 kilo gold and 1,000 oz silver)
- American Gold Buffaloes (less than 1 kilo)
- Canadian Silver Maple Leafs (less than 1,000 oz)
- Canadian Gold Maple Leafs (under 25 coins)
- Austrian Gold and Silver Philharmonics (less than 1 kilo gold and 1,000 oz silver)
- Australian Perth Mint Coins (less than 1 kilo)
- Chinese Gold and Silver Pandas (less than 1 kilo gold and 1,000 oz silver)
- Fractional Gold Coins like the South African Krugerrand (under 25 coins)
- Gold 1 oz Mexican Onza (under 25 coins)
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