Silver bars are capital assets just like other investments. Unless you invested using a tax-deferred account such as an IRA, you have to report investment profits to the Internal Revenue Service when you sell silver bars or other forms of precious metals. However, the IRS treats capital gains from precious metal sales s differently than capital gains on most other capital asset sales.
For tax purposes, precious metals are considered collectibles, according to the IRS. Collectibles include silver bars, even though their value depends only on the metal content and not on rarity or artistic beauty. This matters because the maximum long-term capital gains tax rate on collectibles is 28 percent. By contrast, the maximum long-term capital gains tax rate for stocks and most other investments is 15 percent.
Profit and Loss
Just selling silver bars doesn’t create a tax liability. You pay taxes only if you make a profit. To see if this is the case, first add all of your investment costs together to find your tax basis, also called cost basis. Include items such as dealer commissions, storage expenses and appraisal fees, not just the purchase price of the silver bars. Subtract the tax basis from the proceeds from selling the silver bars. If the sale proceeds are more than the tax basis, the answer will be positive and is the amount of your capital gain. Otherwise, you’ll get a negative number and you have a loss.
Capital Gains Taxes
Capital gains may be short term or long term. The gain is short term if you owned the silver for one year or less. Short-term capital gains are taxed at the same rate that applies to ordinary income such as your salary. If you held the silver bars for more than one year, the gain is long-term, so your maximum tax rate is 28 percent.
You don’t have to report a capital loss on silver bars you sell. The IRS won’t force you to take the tax deduction. However, you can use long-term capital losses to offset long-term capital gains from other investments. Use short-term losses to offset short-term capital gains. If you end up with a net loss on long-term or short-term investments, this amount may be used to offset other income.