WEBVTT 00:00:00.000 --> 00:00:02.899 All right, let's let's unpack this today. We're 00:00:02.899 --> 00:00:05.940 diving into a pretty specific and honestly sometimes 00:00:05.940 --> 00:00:07.839 surprising area of investing. We're talking about 00:00:07.839 --> 00:00:11.839 the tax rules for gold and silver. Yeah, it's 00:00:11.839 --> 00:00:14.019 it's definitely not the same playbook you'd use 00:00:14.019 --> 00:00:17.660 for, say, stocks or bonds. And I think that's 00:00:17.660 --> 00:00:20.579 where a lot of the. confusion can come in. Exactly. 00:00:20.839 --> 00:00:22.960 And our guide for this deep dive, our source 00:00:22.960 --> 00:00:25.539 material, is an article by Doug Young. He seems 00:00:25.539 --> 00:00:28.359 to have a really solid background in both financial 00:00:28.359 --> 00:00:30.559 investing and the precious metals market itself. 00:00:30.980 --> 00:00:33.390 Right. And our mission here is, well... Pretty 00:00:33.390 --> 00:00:35.649 simple, really. We want to try and cut through 00:00:35.649 --> 00:00:38.310 some of that complexity, pull out the absolute 00:00:38.310 --> 00:00:41.109 must -know points from this article. So you can 00:00:41.109 --> 00:00:43.390 walk away understanding how the IRS actually 00:00:43.390 --> 00:00:46.090 looks at gold and silver, how profits get taxed, 00:00:46.189 --> 00:00:48.469 and importantly, what strategies the source mentions 00:00:48.469 --> 00:00:52.119 for maybe minimizing your tax liability. keeping 00:00:52.119 --> 00:00:53.840 more of your money. And believe us, there are 00:00:53.840 --> 00:00:56.479 some interesting twists here, particularly around 00:00:56.479 --> 00:00:58.740 why these assets get treated differently by the 00:00:58.740 --> 00:01:01.399 IRS and what that actually means for your tax 00:01:01.399 --> 00:01:03.979 bill. OK, so let's just jump right in. The core 00:01:03.979 --> 00:01:07.159 of it. Why are gold and silver taxes different? 00:01:07.700 --> 00:01:10.180 What does Doug Young's article flag right away 00:01:10.180 --> 00:01:13.040 as the the key distinction? Yeah, right off the 00:01:13.040 --> 00:01:16.079 bat, the article is super clear. The IRS classifies 00:01:16.079 --> 00:01:18.879 physical gold and silver as collectibles. Collectibles. 00:01:18.920 --> 00:01:21.680 OK. So not capital assets in the same way as 00:01:21.680 --> 00:01:23.500 like a share of Apple's stock or a corporate 00:01:23.500 --> 00:01:27.040 bond. And this classification, it's really the 00:01:27.040 --> 00:01:29.120 foundation for everything else tax wise, isn't 00:01:29.120 --> 00:01:31.859 it? That's honestly surprising to me. Collectibles, 00:01:32.040 --> 00:01:34.959 like you mean like art or, I don't know, rare 00:01:34.959 --> 00:01:38.000 stamps. How does that change the way gains are 00:01:38.000 --> 00:01:40.420 taxed compared to, let's say, selling a stock 00:01:40.420 --> 00:01:42.799 you've held? Well, the big impact is on the long 00:01:42.799 --> 00:01:45.370 term capital gains rate. I mean, just like other 00:01:45.370 --> 00:01:47.489 investments, if you sell gold or silver for a 00:01:47.489 --> 00:01:49.549 profit, that's a capital gain. Simple enough. 00:01:50.189 --> 00:01:52.189 But the rate you pay depends on how long you 00:01:52.189 --> 00:01:56.430 held it. OK, OK. So same basic idea of long term 00:01:56.430 --> 00:01:58.709 versus short term holding periods. But the actual 00:01:58.709 --> 00:02:01.510 numbers, the tax rates are different specifically 00:02:01.510 --> 00:02:04.049 because of this collectible status. Precisely. 00:02:04.189 --> 00:02:06.670 Yeah. The article specifies that for gold and 00:02:06.670 --> 00:02:08.969 silver held for more than a year, that's what 00:02:08.969 --> 00:02:12.009 the IRS counts as long term for these. The maximum 00:02:12.009 --> 00:02:14.750 capital gains tax rate is 28 percent. Whoa, hang 00:02:14.750 --> 00:02:18.199 on. Twenty eight percent. That. That feels quite 00:02:18.199 --> 00:02:21.360 a bit higher than the usual maximum long -term 00:02:21.360 --> 00:02:23.919 rate for stocks, right, which is about 20 % for 00:02:23.919 --> 00:02:25.860 most people. It is higher. And that's a really 00:02:25.860 --> 00:02:28.360 critical point from the source. Yeah. That collectible 00:02:28.360 --> 00:02:31.539 status means your long -term gains could face 00:02:31.539 --> 00:02:35.020 this higher 28 % rate. OK. So holding for over 00:02:35.020 --> 00:02:38.039 a year caps you at 28%. What if you sell faster? 00:02:38.280 --> 00:02:40.659 like within a year. Well if you sell within a 00:02:40.659 --> 00:02:42.699 year the article explains those gains are short 00:02:42.699 --> 00:02:45.360 -term capital gains and they get taxed at your 00:02:45.360 --> 00:02:47.099 ordinary income rate so depending on your total 00:02:47.099 --> 00:02:50.520 income that rate could go as high as 37%. Up 00:02:50.520 --> 00:02:53.240 to 37%. Okay, wow. So straight away, the holding 00:02:53.240 --> 00:02:55.479 period isn't just about long versus short. It's 00:02:55.479 --> 00:02:57.379 about a potentially massive difference in the 00:02:57.379 --> 00:02:59.939 actual tax rate applied to your profit. The article 00:02:59.939 --> 00:03:01.919 really seems to emphasize that just holding for 00:03:01.919 --> 00:03:04.580 that extra day over a year can make a really 00:03:04.580 --> 00:03:07.879 significant tax difference. Exactly. But, you 00:03:07.879 --> 00:03:09.539 know, before you even get to worrying about the 00:03:09.539 --> 00:03:11.000 rate, you need to figure out the actual gain. 00:03:11.479 --> 00:03:13.379 And that always starts with your cost basis. 00:03:13.479 --> 00:03:15.530 Right. And the article spends some time on this 00:03:15.530 --> 00:03:18.710 because it's not just the price tag on the metal 00:03:18.710 --> 00:03:20.689 itself when you bought it, is it? No, not at 00:03:20.689 --> 00:03:23.870 all. Your cost basis is like your initial investment 00:03:23.870 --> 00:03:27.370 amount in that specific asset. And the source 00:03:27.370 --> 00:03:30.099 is very clear. It includes more than just the 00:03:30.099 --> 00:03:33.539 spot price or the face value of a coin. OK. So 00:03:33.539 --> 00:03:35.580 what else gets included in that basis number? 00:03:35.699 --> 00:03:37.560 The article had a good example, I think. Yes. 00:03:37.699 --> 00:03:39.780 The source explains your cost basis, includes 00:03:39.780 --> 00:03:42.460 the initial purchase price, plus any other cost 00:03:42.460 --> 00:03:45.379 you had to pay to actually acquire it. So think 00:03:45.379 --> 00:03:48.740 about the premium you pay to a dealer, that amount 00:03:48.740 --> 00:03:52.120 over the melt value or spot price. That premium. 00:03:52.439 --> 00:03:54.379 That's part of your cost. Oh, interesting. So 00:03:54.379 --> 00:03:57.740 if you bought, say, a gold bar for $1 ,500, but 00:03:57.740 --> 00:04:00.879 the dealer charged a $50 premium, your starting 00:04:00.879 --> 00:04:03.780 point for calculating profit isn't $1 ,500. It's 00:04:03.780 --> 00:04:07.360 actually $50, $50. Exactly right. That $50 premium 00:04:07.360 --> 00:04:09.819 becomes part of your investment cost. And the 00:04:09.819 --> 00:04:11.740 article points out other costs you might be able 00:04:11.740 --> 00:04:14.780 to add to your basis, too. Like storage fees. 00:04:15.240 --> 00:04:17.579 If you're paying a third -party service to hold 00:04:17.579 --> 00:04:19.980 the physical metal for you. Correct, yeah. If 00:04:19.980 --> 00:04:22.560 you're paying for secure storage, those annual 00:04:22.560 --> 00:04:24.500 fees, according to the source, can be added to 00:04:24.500 --> 00:04:26.980 your cost basis. The article even gives an example, 00:04:27.180 --> 00:04:29.839 like, if you paid $100 a year for storage for 00:04:29.839 --> 00:04:32.480 three years, you could add $300 to your basis 00:04:32.480 --> 00:04:35.519 when you eventually sell. That reduces your taxable 00:04:35.519 --> 00:04:39.360 gain even further. That's a really crucial detail. 00:04:39.560 --> 00:04:41.500 It sounds like keeping meticulous records isn't 00:04:41.500 --> 00:04:43.759 just, you know, a good habit. It's absolutely 00:04:43.759 --> 00:04:46.540 essential for calculating your gain accurately 00:04:46.540 --> 00:04:48.839 and reporting it correctly. The source mentions 00:04:48.839 --> 00:04:51.519 reporting these sales on Schedule D of Form 1040, 00:04:51.519 --> 00:04:53.959 right? And it really stresses meeting detailed 00:04:53.959 --> 00:04:57.100 records, purchase dates, prices, those premiums, 00:04:57.220 --> 00:04:59.199 storage fees, maybe even costs related to the 00:04:59.199 --> 00:05:02.139 sale itself. Absolutely. Having that paper trail, 00:05:02.319 --> 00:05:04.920 that documentation helps make sure you're only 00:05:04.920 --> 00:05:07.649 paying tax on the actual profit you made after 00:05:07.649 --> 00:05:10.250 all those related costs are factored in, not 00:05:10.250 --> 00:05:12.930 some inflated amount. The example in the article 00:05:12.930 --> 00:05:16.269 about selling a silver coin for $200 with $150 00:05:16.269 --> 00:05:19.810 cost basis, making the gain $50 really shows 00:05:19.810 --> 00:05:22.250 why tracking that basis is so important. OK. 00:05:22.389 --> 00:05:24.709 OK. So we get the classification collectibles. 00:05:24.829 --> 00:05:27.670 We get the rates 28 % long term max, ordinary 00:05:27.670 --> 00:05:30.490 income short term. And we know how to figure 00:05:30.490 --> 00:05:33.480 out the starting point. the cost basis, what 00:05:33.480 --> 00:05:35.699 does the article say about being proactive, about 00:05:35.699 --> 00:05:37.579 actually trying to minimize the tax you might 00:05:37.579 --> 00:05:39.819 owe? Right, so the source naturally moves from 00:05:39.819 --> 00:05:43.269 just understanding the rules to... practical 00:05:43.269 --> 00:05:45.050 strategies for managing that tax bite. Though 00:05:45.050 --> 00:05:46.730 I guess we already sort of touched on the first 00:05:46.730 --> 00:05:48.310 one, didn't we? The holding period strategy. 00:05:48.509 --> 00:05:50.889 Exactly, yeah. Given that potential jump from 00:05:50.889 --> 00:05:54.670 a 28 % max rate up to possibly 37%, just simply 00:05:54.670 --> 00:05:57.569 holding your gold or silver for more than 365 00:05:57.569 --> 00:06:00.189 days is the most direct strategy the article 00:06:00.189 --> 00:06:02.709 discusses. That qualifies you for the lower long 00:06:02.709 --> 00:06:04.230 -term collectible rate. It's straightforward, 00:06:04.810 --> 00:06:06.790 but, well, it requires patience. Makes sense. 00:06:07.310 --> 00:06:09.790 And the other strategy mentioned. It sounds familiar 00:06:09.790 --> 00:06:12.670 from other kinds of investing, tax loss harvesting. 00:06:12.889 --> 00:06:16.029 Yes, exactly. The article explains how this technique, 00:06:16.230 --> 00:06:17.949 which you often hear about with stocks or mutual 00:06:17.949 --> 00:06:20.949 funds, can apply here, too. It basically involves 00:06:20.949 --> 00:06:23.509 selling an investment, any investment really, 00:06:23.949 --> 00:06:26.449 that has gone down in value to deliberately realize 00:06:26.449 --> 00:06:30.189 a loss on paper. OK, and how does realizing that 00:06:30.189 --> 00:06:32.829 loss help specifically with gains from gold and 00:06:32.829 --> 00:06:35.310 silver? Well, that realized loss can be used 00:06:35.310 --> 00:06:37.370 to offset capital gains you've made elsewhere. 00:06:38.079 --> 00:06:40.339 including gains from selling your gold or silver. 00:06:40.939 --> 00:06:43.779 So if you have, say, a $1 ,000 gain from selling 00:06:43.779 --> 00:06:46.959 some gold, but maybe a $600 loss from selling 00:06:46.959 --> 00:06:49.199 some stock, the article notes you'd only pay 00:06:49.199 --> 00:06:51.699 tax on the net gain of $400 in that scenario. 00:06:52.259 --> 00:06:54.139 It's basically a way to use losses in one part 00:06:54.139 --> 00:06:56.240 of your portfolio to reduce your overall taxable 00:06:56.240 --> 00:06:59.459 income from gains in another part. Now, the article 00:06:59.459 --> 00:07:01.180 also makes a point of highlighting a completely 00:07:01.180 --> 00:07:03.220 different sort of tax situation. If you decide 00:07:03.220 --> 00:07:06.180 to hold gold and silver within an IRA, Ah, right. 00:07:06.300 --> 00:07:08.680 The IRA route. That offers potential tax advantages, 00:07:08.720 --> 00:07:11.019 I guess. But it definitely comes with its own 00:07:11.019 --> 00:07:13.959 specific IRS rulebook. What's the first thing 00:07:13.959 --> 00:07:15.639 the source points out about putting precious 00:07:15.639 --> 00:07:18.399 metals into an IRA? The key constraint right 00:07:18.399 --> 00:07:20.779 up front is the purity standard. You can't just 00:07:20.779 --> 00:07:23.079 put any gold or silver coin or bar in there. 00:07:23.439 --> 00:07:26.180 The article is very specific. Gold must be 99 00:07:26.180 --> 00:07:30.379 .5 % pure and silver needs to be 99 .9 % pure 00:07:30.379 --> 00:07:33.079 to be eligible for a self -directed IRA. Okay. 00:07:33.439 --> 00:07:36.660 So things like, you know, specific bars or certain 00:07:36.660 --> 00:07:38.779 government coins that meet those standards. I 00:07:38.779 --> 00:07:41.220 think it mentioned American Gold Eagles or Canadian 00:07:41.220 --> 00:07:43.720 Maple Leafs as examples. So you really have to 00:07:43.720 --> 00:07:45.879 check that purity requirement carefully before 00:07:45.879 --> 00:07:48.600 buying for an IRA. Absolutely critical. And while 00:07:48.600 --> 00:07:50.779 your contributions generally follow the standard 00:07:50.779 --> 00:07:53.939 IRA limits, the tax treatment changes quite significantly 00:07:53.939 --> 00:07:56.509 when you eventually take distributions. when 00:07:56.509 --> 00:07:59.290 you take the metal or cash out. Right. The article 00:07:59.290 --> 00:08:01.689 emphasizes this point. When you withdraw metal 00:08:01.689 --> 00:08:04.050 or cash from a precious metals IRA, maybe in 00:08:04.050 --> 00:08:06.610 retirement, those distributions get taxed as 00:08:06.610 --> 00:08:09.589 ordinary income. That's correct. So unlike selling 00:08:09.589 --> 00:08:12.029 metal you held personally, where you might pay 00:08:12.029 --> 00:08:14.870 that 28 % collectible rate on long -term gains, 00:08:15.410 --> 00:08:17.670 taking it out of an IRA means it just gets added 00:08:17.670 --> 00:08:20.529 to your regular income for that year, and it's 00:08:20.529 --> 00:08:22.790 taxed at your marginal rate, which again could 00:08:22.790 --> 00:08:26.079 be up to 37%. It's a really crucial difference 00:08:26.079 --> 00:08:28.000 to understand if you're considering using an 00:08:28.000 --> 00:08:30.220 IRA for holding metals. Okay, so let's try and 00:08:30.220 --> 00:08:32.120 pull together the main takeaways here, the key 00:08:32.120 --> 00:08:34.179 insights from Doug Young's article on this. What 00:08:34.179 --> 00:08:36.659 are the absolute must -knows for you, the listener? 00:08:36.940 --> 00:08:39.200 Okay, number one I'd say, gold and silver are 00:08:39.200 --> 00:08:42.500 classified as collectibles by the IRS. That immediately 00:08:42.500 --> 00:08:45.379 sets them apart tax -wise from your typical stock 00:08:45.379 --> 00:08:47.960 and bond investments. Right. And that collectible 00:08:47.960 --> 00:08:50.059 classification means different capital gains 00:08:50.059 --> 00:08:53.179 rates. A maximum of 28 % for long -term gains 00:08:53.179 --> 00:08:56.100 if you hold over a year, which is probably higher 00:08:56.100 --> 00:08:58.000 than the rate for other assets you hold long 00:08:58.000 --> 00:09:00.620 -term. And your normal ordinary income rates? 00:09:00.879 --> 00:09:03.779 Potentially up to 37 % for any short -term gains 00:09:03.779 --> 00:09:06.860 if you hold a year or less. Yeah. And calculate 00:09:06.860 --> 00:09:09.600 your taxable gain. It's not just sale price minus 00:09:09.600 --> 00:09:12.299 purchase price. The source makes it really clear. 00:09:12.460 --> 00:09:15.620 You need to factor in your full cost basis that 00:09:15.620 --> 00:09:17.600 includes the purchase price plus things like 00:09:17.600 --> 00:09:19.639 those dealer premiums Maybe even storage fees 00:09:19.639 --> 00:09:22.500 all that significantly impacts the final taxable 00:09:22.500 --> 00:09:25.360 amount and the main strategies the article suggests 00:09:25.360 --> 00:09:27.899 for actually managing those taxes Well, there's 00:09:27.899 --> 00:09:30.399 the holding period strategy basically aim for 00:09:30.399 --> 00:09:33.460 holding over a year to target that lower 28 percent 00:09:33.460 --> 00:09:36.179 rate and using tax loss Harvesting across your 00:09:36.179 --> 00:09:38.759 whole portfolio to potentially offset some of 00:09:38.759 --> 00:09:41.639 those games And finally, if you go the IRA route, 00:09:41.740 --> 00:09:43.960 remember there are specific rules. Strict purity 00:09:43.960 --> 00:09:48.299 standards, 99 .5 % for gold, 99 .9 % for silver, 00:09:48.659 --> 00:09:51.759 for any metals held inside. And critically, any 00:09:51.759 --> 00:09:54.179 distributions you take out later are taxed as 00:09:54.179 --> 00:09:56.899 ordinary income, not at those collectible capital 00:09:56.899 --> 00:09:59.409 gains rates. You know, understanding these specific 00:09:59.409 --> 00:10:01.970 tax rules, it isn't just about checking boxes 00:10:01.970 --> 00:10:05.009 for the IRS. It seems absolutely vital for maximizing 00:10:05.009 --> 00:10:07.269 your potential net returns if you invest or are 00:10:07.269 --> 00:10:09.490 thinking about investing in physical precious 00:10:09.490 --> 00:10:11.549 metals. It really is a different tax animal, 00:10:11.649 --> 00:10:14.070 isn't it? It definitely is. It requires paying 00:10:14.070 --> 00:10:16.929 attention to details that maybe aren't always 00:10:16.929 --> 00:10:18.889 top of mind with other assets you might hold. 00:10:19.200 --> 00:10:21.620 Which, I think, brings us to a final thought 00:10:21.620 --> 00:10:23.919 for you to consider, sort of building on everything 00:10:23.919 --> 00:10:26.259 we've unpacked from the source in this deep dive. 00:10:26.720 --> 00:10:29.159 Given that gold and silver carry this unique 00:10:29.159 --> 00:10:32.080 collectible tax status, with those potentially 00:10:32.080 --> 00:10:34.539 higher long -term capital gains rates compared 00:10:34.539 --> 00:10:37.320 to many other investments, how might this specific 00:10:37.320 --> 00:10:39.580 tax treatment influence their strategic role, 00:10:39.600 --> 00:10:42.259 or maybe even their weighting, within your broader 00:10:42.259 --> 00:10:44.820 overall investment portfolio? Something to think 00:10:44.820 --> 00:10:45.080 about.