Precious metals taxes and IRAs

Gains on metal held for one year or less are short-term and are taxed at your ordinary income tax rate, the same as wages. The 28% cap doesn't apply.

Gains on metal held for more than one year are long-term and are taxed as collectibles gains: at your ordinary rate, but capped at 28%.

The holding period generally starts the day after you buy and includes the day you sell. Your purchase and sale invoices are the evidence, so keep them.

Inherited property is generally treated as held long-term, however briefly you owned it. Gifted metal usually takes on the giver's holding period. The details have exceptions, so ask a tax professional.

Many exchange-traded products that hold physical metal in a vault are set up as grantor trusts. For tax purposes, owning shares is generally treated like owning a share of the metal, so long-term gains are often taxed at the collectibles rate, capped at 28%, rather than at the lower stock rates.

A physically backed trust may sell small amounts of metal to pay its expenses. That can create small gains or losses for shareholders each year, which the fund's annual tax information explains.

Funds that use futures contracts instead of holding metal can follow different rules, and some send a Schedule K-1 instead of a Form 1099. Read the fund's tax section before you buy.

Shares in mining companies, and funds that hold them, are generally taxed like other stocks, not as collectibles.

Generally the price you paid, including the dealer's premium, plus costs of buying such as commissions and fees. Costs of selling generally reduce the amount you're treated as receiving.

If you bought the same coin at different times and prices, keep records that show which purchase each sale comes from. How to match sales to purchases can affect your gain, so ask a tax professional if you're unsure.

Inherited metal generally takes a basis equal to its value on the date of death. Gifted metal generally keeps the giver's basis, with exceptions for losses. Keep any appraisal or estate paperwork.

Invoices showing the date, item, quantity, weight and price; sale receipts or settlement statements; and any Form 1099-B you receive. Keep them for as long as you own the metal and for several years after you report the sale.

Some states exempt bullion and coins from sales tax entirely, some exempt them only above a set purchase amount, some exempt only certain metals or items, and some tax them like other goods.

When you buy online, dealers generally charge sales tax based on the state the order is shipped to, following that state's rules.

If a seller doesn't collect sales tax that your state requires, you may owe use tax to your state instead.

Your state's department of revenue publishes the current rules. A dealer's checkout will usually show whether tax applies to your order.

When you sell certain products to a dealer in certain quantities, the dealer may have to report the sale on Form 1099-B. Which items and amounts are covered is set out in the IRS Instructions for Form 1099-B, and many sales fall outside them.

Businesses, including dealers, generally must file Form 8300 when they receive more than $10,000 in cash in one transaction or in related transactions. This usually comes up when you pay a dealer in cash.

Breaking a cash purchase into smaller pieces to avoid reporting is called structuring, and it is illegal even if the money is clean.

If you have a taxable gain, you are generally required to report it on your return, whether or not you receive a 1099-B.

A traditional or Roth IRA whose custodian allows alternative assets such as physical metal. The usual IRA contribution limits, deadlines and withdrawal rules still apply.

A bank or an IRS-approved non-bank trustee holds the account, keeps records, reports to the IRS and buys or sells metal on the account's behalf. You choose the dealer and products; the custodian processes the purchase.

The law requires IRA bullion to be in the physical possession of the trustee or custodian, which in practice means a depository the custodian uses, often called an IRS-approved depository. The metal belongs to the IRA, not to you.

New contributions must be made in cash. You can also move money from another IRA or a workplace plan; a direct transfer between custodians avoids the 60-day deadline and the once-a-year limit on indirect IRA rollovers, and the mandatory withholding when a workplace plan pays you directly.

You can't put coins you already hold into an IRA, and selling your own metal to your IRA is a prohibited transaction. The IRA has to buy its metal from a third party.

Gains aren't taxed while the metal stays in the IRA. Withdrawals from a traditional IRA are taxed as ordinary income, not at the collectibles rate, and qualified Roth withdrawals are generally tax-free. Withdrawals before age 59½ may also face a 10% additional tax unless an exception applies.

You can usually take a distribution in cash or have the metal shipped to you. Taking the metal itself is a distribution, taxed on its value at the time. Required minimum distributions apply to traditional IRAs, so plan how you'll meet them.

Rare, numismatic and most collectible coins can't be held in an IRA, whatever their metal content. Neither can jewelry, art or antiques.

Most rare and graded coins are bought for their collector value, not their metal, and generally don't qualify. Read more about rare coins.

The IRS doesn't publish a list of approved coins or bars. When a seller says a coin is "IRS approved", ask which rule it meets and confirm with your custodian.

A one-off charge from the custodian to open the account.

An annual administration fee, either flat or based on the account's value.

Charged by the depository, flat or as a percentage of value. Segregated storage, where your exact items are kept apart, usually costs more than commingled storage.

Charges for each purchase, sale, wire or shipment, and sometimes for closing or transferring the account.

The markup over the metal's value on each coin or bar. On high-premium products this is often the biggest cost of all, far more than the yearly fees.

When the IRA sells, the dealer pays less than it charges. Ask how its buyback prices are set before you buy.

Investment Income and Expenses: capital gains, holding periods and the collectibles rate.

How to report sales, including the 28% rate gain worksheet for collectibles gains.

Basis of Assets: how cost basis is worked out, including inherited and gifted property.

Who counts as a broker, including some precious-metals dealers, and which sales must be reported.

IRA contributions, rollovers, distributions and the treatment of collectibles in IRAs.

The IRS explanation of investments in collectibles in individually directed retirement accounts, based on Internal Revenue Code section 408(m).