What the IRS Takes: A Plain-English Guide to US Tax on Precious Metals
Physical bullion is taxed as a collectible in the United States, at a long-term rate of up to 28% rather than the 15% or 20% most investors expect. That single rule, plus the vehicle you hold the metal in, can change your after-tax return more than a good entry price ever will.
Published · 12 min read
Key Takeaways
- The IRS classifies physical gold, silver, platinum and palladium as collectibles. Long-term gains are taxed at your ordinary rate capped at 28% — not the 0/15/20% long-term capital gains schedule that applies to stocks.
- The cap is a ceiling, not a flat rate. If your ordinary bracket is below 28%, you pay your bracket. Investors in lower brackets are frequently surprised in the good direction.
- The 28% treatment follows the metal, not the wrapper. The large physically-backed grantor trusts such as GLD and SLV are generally taxed as collectibles too, which defeats the most common workaround investors attempt.
- Held under a year, everything is ordinary income. High earners may also owe the 3.8% Net Investment Income Tax on top of whichever rate applies.
- Physical metals are not subject to the wash-sale rule, which makes tax-loss harvesting materially more flexible in bullion than in securities — one of the few places the collectibles regime works in your favour.
Most investors research where to buy metal, how to store it, and what allocation to hold — then discover the tax treatment only when they sell. This is the wrong order, because the tax rule that applies to physical precious metals in the United States is genuinely unusual, and it is one of the few variables in this asset class you can plan around with certainty rather than forecast. This guide covers the collectibles rate and what it applies to, how the common investment vehicles differ, what records you need, and where the rules are quietly more favourable than in equities. All prices in this article are quoted in US dollars (USD) per troy ounce. This is educational material about how the rules work, not tax advice about your situation.
The Rule That Surprises Everyone
Under the Internal Revenue Code, physical precious metals are classified as collectibles — the same category as art, antiques and rare coins. The practical consequence is that long-term capital gains on bullion do not receive the preferential 0%, 15% or 20% rates that apply to stocks and most other long-held investments. Instead they are taxed at your ordinary income rate, capped at a maximum of 28%.
28% Maximum Federal Long-Term Rate on Physical Bullion. Against a maximum of 20% for long-term gains on equities. For a top-bracket investor, that is an 8 percentage point gap on every dollar of gain — before any state tax or the Net Investment Income Tax is considered.
The word "capped" is important and frequently lost in summaries that describe this as "the 28% gold tax". The rate you pay is the lower of 28% and your ordinary income bracket. An investor whose ordinary rate is 22% pays 22% on a long-term bullion gain, not 28%. The collectibles rule removes the preferential treatment stocks receive; it does not impose a penalty rate on people who would otherwise pay less. Our tax calculator applies exactly this logic — the lower of the collectibles cap and your bracket — and the effect is that the rule bites hardest on high earners and is close to neutral for many middle-bracket investors.
| Your ordinary bracket | Long-term rate on bullion | Long-term rate on stocks | Gap |
|---|---|---|---|
| 12% | 12% | 0% | 12 points worse — the preferential 0% equity rate has no bullion equivalent |
| 22% | 22% | 15% | 7 points worse |
| 24% | 24% | 15% | 9 points worse |
| 32% | 28% (capped) | 15% | 13 points worse |
| 35% | 28% (capped) | 15% or 20% | 8 to 13 points worse |
| 37% | 28% (capped) | 20% | 8 points worse |
Short-Term Is Simply Ordinary Income
Everything above concerns metal held longer than one year. Sell inside twelve months and the collectibles discussion is irrelevant — the gain is short-term and taxed as ordinary income at your full marginal rate, exactly as a short-term stock gain would be. There is no preferential treatment and no cap to shelter you.
This creates a meaningful and entirely controllable planning point. The difference between selling at eleven months and thirteen months can be the difference between a 37% rate and a 28% one on the same gain. It is one of the few levers in precious metals investing that is purely administrative — it requires no market view whatsoever, only a calendar and the discipline to consult it before transacting.
The Vehicle Changes the Answer — But Not the Way Most People Guess
The most common attempted workaround is to hold metal exposure through an exchange-traded product rather than physically, on the assumption that a security must be taxed as a security. For the large physically-backed trusts, this generally does not work. Products such as GLD and SLV are structured as grantor trusts holding physical metal, and the investor is treated as owning a proportionate share of that metal directly. The collectibles treatment follows through the wrapper. The tax follows the substance of what is held, not the ticker.
Some closed-end vehicles are structured differently and may permit shareholders to make an election that changes the treatment to standard long-term capital gains rates — an election that has conditions, requires the fund to provide the necessary annual information, and must be made properly. Mining equities are ordinary corporate shares and receive ordinary equity treatment, which is why they can look materially better after tax than the metal itself even when the metal outperforms before tax.
| Vehicle | Typical long-term federal treatment | What to watch |
|---|---|---|
| Physical bullion (coins and bars) | Collectibles — ordinary rate capped at 28% | Applies to gold, silver, platinum and palladium alike. Storage and insurance costs are generally not deductible for a personal investor. |
| Physically-backed grantor trusts (e.g. GLD, SLV) | Generally collectibles — the wrapper does not change the substance | The workaround most investors try, and the one that most often fails. |
| Certain closed-end metal trusts (e.g. PHYS, PSLV) | Potentially standard LTCG rates where a valid shareholder election is made | The election has conditions and depends on the fund supplying the required annual statements. Do not assume it applies automatically. |
| Mining equities and mining ETFs | Standard long-term capital gains (0/15/20%) | Ordinary equity treatment, but the underlying investment carries operational and jurisdictional risk the metal does not. |
| Metal held inside a qualifying IRA | Deferred or exempt depending on account type | Strict rules on eligible metals, purity and custody. Metal must be held by an approved custodian — taking personal possession can be treated as a distribution. |
The practical lesson is not that one vehicle is universally superior. It is that two investors with identical gold exposure and identical pre-tax returns can keep noticeably different amounts of it, and the difference was determined at the moment they chose the vehicle — years before the tax was payable.
The 3.8% That Sits On Top
Investors above the applicable income thresholds may also owe the Net Investment Income Tax, an additional 3.8% levied on net investment income. It applies on top of whichever rate above is relevant, which means a top-bracket investor selling long-held bullion can face an effective federal rate approaching 31.8% before any state tax enters the calculation. The NIIT is not specific to precious metals — it applies across investment income generally — but it is routinely omitted from back-of-envelope estimates and it is large enough to matter.
Where the Rules Work In Your Favour
The collectibles regime is unhelpful on rates, but there is one significant compensation that most investors never exploit: the wash-sale rule does not apply to physical precious metals.
In securities, selling at a loss and repurchasing a substantially identical position within 30 days disallows the loss for immediate use. That constraint does not extend to physical metals, which are not securities. An investor sitting on an unrealised loss in physical bullion can in principle realise it and re-establish the position without the 30-day waiting period that governs stocks — subject, always, to the round-trip dealer spread, which in silver can easily exceed the tax benefit being harvested.
Reporting: What Gets Filed and What Dealers Report
Gains and losses on precious metals are reported on Form 8949 and carried to Schedule D, the same forms used for other capital assets. Each disposal is a line item requiring the description, the acquisition date, the disposal date, the proceeds and the cost basis. Proceeds are generally reported net of selling costs, so the gain on the line equals proceeds minus basis.
Separately, dealers have their own reporting obligations. Certain bullion sales above specified quantity thresholds for particular products trigger a Form 1099-B from the dealer to the IRS, and cash transactions above the reporting threshold trigger a separate filing. The thresholds are product-specific and not intuitive, and the important point for an investor is the obvious one: your reporting obligation does not depend on whether a dealer files anything. It exists either way.
- Acquisition date and disposal date for every lot — these determine long-term versus short-term treatment and cannot be reconstructed from a bank statement.
- Cost basis including the dealer premium, shipping and any sales tax paid at purchase, since these generally increase your basis and therefore reduce your taxable gain.
- Product description, quantity and weight, so a disposal can be matched to the correct lot.
- Proceeds and any selling fees or commissions deducted at sale.
- Assay, storage and insurance documentation where relevant to establishing the position.
The premium you paid at purchase is part of your cost basis. Investors who record only the spot price at the time of purchase systematically overstate their own taxable gain.
State Tax Is a Separate Question Entirely
Everything above is federal. States impose their own income tax rules on capital gains, and separately differ enormously on sales tax at the point of purchase. A number of states exempt investment-grade bullion from sales tax entirely; others apply full sales tax; several exempt purchases above a threshold value while taxing smaller ones. A sales tax charge at purchase is not a small consideration on a metals position — it is an immediate cost against your position on day one, though it does generally increase your cost basis.
Because the state treatment varies so widely and changes with some regularity, it is one of the few areas where a general article genuinely cannot substitute for checking your own state’s current rules before a large purchase. We maintain a state-by-state guide to sales tax on bullion — all fifty states plus DC, with rates, thresholds and recent law changes — as a starting point for exactly that check.
What This Means for How You Build a Position
The tax treatment does not argue against owning precious metals. It argues for owning them deliberately. A few consequences follow directly from the rules above, and none of them require a market forecast.
- A long-term core position is more tax-efficient than an actively traded one, because every realised gain in a collectible is taxed without the preferential rate that softens equity trading.
- The one-year boundary is worth respecting deliberately, since it is the single largest rate difference you control outright.
- Vehicle selection is a tax decision as much as a cost decision, and it is made years before the bill arrives.
- Lot-level records are not optional bookkeeping — without them you cannot establish basis, and an unestablished basis is an expensive assumption to make in your own disfavour.
- After-tax return is the only number that actually funds anything. A vehicle that trails by half a percentage point before tax can still finish ahead after it.
You can model the after-tax difference between physical bullion, closed-end trusts, mining equities and ETFs at your own bracket and holding period using our tax calculator. For investors tracking multiple purchase lots and disposals across years, TaxStack maintains the lot-level ledger these rules require and produces Form 8949 line items and a realised-gain worksheet from it — figures computed from the lot data you provide, intended to be checked by your CPA rather than to replace one.