Want to invest in gold? Here's how to plan for - or even avoid - the potential tax headaches

MW Want to invest in gold? Here's how to plan for - or even avoid - the potential tax headaches

Andrew Keshner

Gold isn't taxed the same way as other investments

Gold stands out for the IRS too.

After the gold rush, comes the taxman. It's time for investors to get ready.

This year, gold has repeatedly topped itself with record-high prices. Multibillion-dollar inflows to gold ETFs also highlight the metal's current glitter.

But while the asset now stands out to investors, it also stands out to the Internal Revenue Service.

The tax agency deems gold a "collectible." As a result, people might pay more taxes on their gold profits than they would on sales of their stocks and bonds - potentially a lot more.

Capital gains on gold can be taxed up to 28% when the sale is at least one year after the purchase. Long-term capital gains on stock and bond sales face a 20% maximum.

The specialized tax rules apply to the sales of gold bars, or bullion. But even indirect exposure to gold could trigger higher taxes. Major ETFs for the gold market, such as SPDR Gold Shares GLD, warn investors of the chance of steeper taxes in disclosures.

The question is, how many people are weighing IRS regulations or the fine print on investment funds as gold prices move higher?

"You will have some investors that might underappreciate the tax implications of gold relative to other investments they've had in their lives," said Ryan Zabrowski, senior portfolio manager at Krilogy, a wealth-management firm with offices in Missouri and Texas.

To be sure, tax bills are far from the only thing to consider if someone wants to add the precious metal to their portfolio. There may be good reasons to own some gold in an economy grappling with uncertainty. "Gold is a hedge against bad outlier events," Zambrowski noted.

December gold, the most actively traded contract (GC00) (GCZ25), closed Friday at $3,809 an ounce, up $37.90 or 1% on the day.

There's a way for the metal's price to climb higher, Aakash Doshi, head of gold strategy at State Street Investment Management, said in a September note. It's more likely than not that gold's price will increase another $500 in the next six months to a year, Doshi wrote.

"If you hold it, it gives you the right kind of diversification in your basket. This has been an increasing message and an increasing story. It's a diversifying hedge," said Joe Cavatoni, senior market strategist at the World Gold Council, a membership organization of the world's largest mining companies.

So far this year, investors poured over $57 billion in net inflows to gold ETFs across the globe, according to World Gold Council data.

Gold may be staying in the investing picture. There are still ways to gain some portfolio protection and also guard against getting smacked by the metal's tax consequences, experts told MarketWatch. Here's how.

Gold vs. stocks - as the IRS sees it

The profit on a stock sale is subject to a capital-gains rate of 0%, 15% or 20%, depending on the rest of the seller's income. The 20% rate applies to households in the mid-six-figure range. For 2025, that's at least $533,401 for individuals and $600,051 for married couples.

An extra 3.8% net investment income tax may also apply. This surtax kicks in at incomes of $200,000 for individuals and $250,000 for married couples.

Stocks and gold would face the same tax rules if bought and sold within a year. Those are short-term capital gains that would count as ordinary income.

Someone speculating on gold prices would probably be facing short-term capital gains, Zabrowski said. But many people use gold as a hedge, he added, and "if you are a hedger, you are probably more committed to the longer term."

It's the long term where gold and other precious metals stand out in the tax code.

Gold, silver and platinum bullion count as a collectible, according to the IRS. It also includes art, rugs, antiques, gems, stamps and coins in its list.

Read also: Gold hit a record and silver's at a 14-year high - this Wall Street bank says two other commodities will join the party

"For taxpayers with ordinary income-tax rates below 28%, the collectible tax is their lower ordinary income-tax rate," said Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting.

The federal tax brackets are 10%, 12%, 22%, 24%, 32%, 35% and 37%.

The 28% rate falls between brackets, and it's a consideration for people in upper-tier tax brackets, said Andrew Whitehair, a director at Baker Tilly's national tax practice. But less wealthy investors could face headaches too.

Suppose someone is in the 22% bracket. They'd face 15% on a stock sale, but their profits on a collectible like gold would be taxed at 22%. That's a notable difference, Whitehair said.

Broadly speaking, "if the sale is going to push you into a higher marginal bracket, maybe think about timing that sale to subject it to the lowest marginal rate possible," he said.

The gamut of gold exposure

The tax bill a person would get from gold depends on the profit amount, the rest of the seller's financial picture, and also the form of the investment.

Investors could buy bullion, yet there's the potential for the maximum 28% tax, along with other extra expenses. People who want the metal itself would also have to consider their storage and insurance costs. In all likelihood, there's no deduction for that, said Luscombe.

Investment expenses were once an eligible write-off for itemizers, but it hasn't been that way since the first Trump tax cuts of 2017, he noted. If a day trader can show the IRS that gold is their business instead of an investment, the costs of holding bullion might be a deductible business expense. Yet gaining trader tax status with the IRS is no easy feat.

Buying certificates from a gold-bullion bank or shares in physically backed gold ETFs would be another possibility, said Luscombe. Yet certificate holders and ETF shareholders are still facing the potential 28%, he added.

Owning stock in mining companies would offer indirect gold exposure without any specialized capital-gains rules. Buying and selling shares past one year would trigger the conventional capital gains rates of 0%, 15% and 20%, depending on income.

There's a different twist to watch for when investing in mining companies, said Whitehair at Baker Tilly. Many of these companies have foreign headquarters and their dividends may be subject to taxes in their homeland and U.S. taxes. "Often, a foreign tax credit is available to reduce double taxation," Whitehair said.

Foreign companies have to meet certain requirements for the IRS to treat their dividends as qualified dividends, gaining the preferential rate of 0%, 15% and 20%, he added. Many of the large foreign gold miners are listed on U.S. stock exchanges or come from countries that have tax treaties with the U.S., so many would likely offer qualified dividends - "but some may not be," Whitehair said.

Gold price action and mining-company stock are not one in the same, Zabrowski noted. With mines across the world potentially operating in unstable places, companies face a range of challenges.

"Investing in gold-mining stocks would not be a collectible and gains would be subject to regular capital-gains rates," Luscombe wrote. "However, the risk analysis for gold-mining stocks would be different than a direct investment in gold."

Which account for the gold?

Investors have to consider the type of gold exposure they want, and they have to consider which type of account to manage the shiny yellow side of their portfolio.

For instance, in a brokerage account, they could buy and sell ETF shares and gain the value of tax-loss harvesting. That's the tactic of strategic selling at a loss to offset the bite of capital gains.

With a retirement account, the IRS typically prohibits people from investing in collectibles through an IRA, Whitehair explained. Gold is one of the exceptions, but it has to be done in specialized gold IRAs that can come with high fees and other considerations. The gold IRA's value would grow tax-deferred, but its distributions would count as ordinary income.

Depending on a person's finances, the tax rate on those withdrawals could exceed the rates from regular capital-gains or collectible rates, Luscombe noted.

Tax-savvy gold moves

The golden key to tax planning is timing, no matter the asset in question.

Investors need to consider what else is happening in their lives that could bump them to higher brackets, alongside the extra tax on a gold sale. They also need to weigh how they could build up deductions that offset gold's impact. "If there is a year in which you do want to sell, then accelerating deductions [or] slowing income could help," said Luscombe.

Generally speaking, a self-employed taxpayer may have wiggle room deciding when they are paid. Likewise, seniors might have some leeway on when they are pulling from retirement accounts and from which accounts they are pulling from.

"Probably the biggest play would be folks in retirement," said Whitehair. A year when they tap more of their aftertax Roth IRA could be a year to sell some more gold, he noted. Deductions might help too, including an itemized deduction for medical expenses.

Wage earners have a tighter range of tax-planning options. Employers likely can't just pause paychecks, even if workers wanted to slow their income for tax purposes.

For them, gold-plated tax planning could involve tax-loss harvesting if they have capital losses, Whitehair said. Another opportunity is increasing pretax 401(k) contributions in order to lower taxable income. If someone has access to a health savings account, that could also reduce taxable income, he added.

At Briaud Financial Advisors, Matthew McKay said client portfolios have about a 12% to 14% allocation to precious metals via ETFs.