“Gold hasn’t been this hot since prospectors rushed to California with picks and shovels to seek a fortune.” Gold is back in a big way, and it’s catching the eyes of investors. Not only is it a shiny sight to behold, but it’s also easier than ever to buy and sell. Recently, our CEO and Senior Wealth Advisor, Marianela Collado, CPA/PFS, CFP®, CDS®, was quoted in an MSN article, sharing her insights on the Gold Rush 2.0. Though you may already have your pick and shovel in hand, it could be helpful to know more about how to invest in gold, what tax surprises may arise, and how working with a financial advisor can help you to actually keep your fortune.
How Do I Invest in Gold?
There are many options available when it comes to investing in gold. A common route is buying physical gold, such as coins, jewelry, or bars. Gold is an easy commodity to find, as it is sold at online marketplaces like APMEX, local coin shops, or even retailers like Costco. You could also invest in Gold Exchange-Traded Funds (Gold ETFs), which are financial instruments that allow you to invest in gold through the stock market without storing physical metal. Each share represents a portion of physical gold in a secure vault, with prices tracking the spot gold price. Additionally, you could sell old jewelry or coins. Pawn Shops or “We Buy Cash for Gold” stores could pay you for unwanted items.
How Do Taxes Affect Gold?
The IRS classifies gold as a collectible, meaning it will have higher taxes than stocks, bonds, or real estate. If you held gold for more than a year, the tax rate can be up to 28% on the profit you make, and if you have a lot of investment income (above $200,000 single or $250,000 married), you may need to pay an extra 3.1% surtax, bringing the total to 31.8%. If you held gold for a year or less, it may be taxed at your ordinary income tax rate, which is the same as you pay on your paycheck. The percentage could range from 10% up to 37% depending on your total income. Marianela shared that even ETFs backed by physical gold are taxed like collectibles.
Rather than investing in physical gold, investing in gold mining companies or funds are typically taxed like regular stocks. Also, if the price of your Gold ETF or investment has gone down since you bought it, you could sell it at a loss which could offset other gains you’ve made in your investments, and may lower your overall tax bill. Timing matters as well, since selling an investment at a loss and buying the same one back within 30 days could make you ineligible to claim the loss for taxes.
How Could Working with a Financial Advisor Help?
Though it might seem straightforward, investing in gold and the taxes that follow can be tricky. When working with an advisor, they can help you analyze different types of gold investments, plan how taxes could affect your investment, and navigate uncertainty. There is no universal investment or tax method that works for everyone, but a deeper understanding of tax and careful planning can help you avoid surprises and make the most of your sparkly investments. If you’re curious about how this could fit into your financial plan, we invite you to contact us.
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