How are coin sales taxed?

I have some gold coins that have increased dramaticaly in value over the past few years, and I was thinking about selling a few to fund my new baby son's college account. Does anybody know what type of tax I will have to pay when I sell them?

Thank you!

 

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Unless profits exceed $10,000 , nothing at all.

 

Jerome:
Huh?

aj:
Coin profits are taxed as long term capital gains, assuming that you hold them for more than one year.
Short term otherwise.

Unless you are a dealer, then it is ordinary income.

But note: If you are doing it as a hobby: 1) gains are taxable income. 2) Losses: tough.

 

Thats like asking what the weather will be like tomorrow as a whole. It depends on where you live. Every state has different laws regarding taxes on investments. I'd advise you contact an accountant who can fill you in on everything legally. Or, you can sell it on Ebay and nobody will be the wiser.
Guy~

 

Just wondering have you reported every coin you have ever sold?
IMO most small collectors do not report it. Example cash deal at a coin show

 

he did not ask what I do, or anyone else.
he asked what the rules were.

 

Ouch!

 

What kinds of coins are you talking about? post some pics.

 

There are a couple of different issues here.

If you are talking about how you pay tax on profits from selling them, Treashunt's reply fits you. That's Federal Income Tax, and you'll also have to deal with State and Local income tax as appopriate.

In addition, there's an issue of sales tax at point of sale. Every state is different.

In Texas, there is no sales tax on coin sales totalling $1,000 or more. Else do the "state + county + city" tax per your locale. In Austin, it totals 8.25% (ouch !).

Selling across state lines never has any sales tax for anyone (constitutional prohibition against restricting interstate commerce).

 

Arizona has no sales tax on coins at all, regardless of amount purchased. Weird how there's so many differences in one country.
Guy~

 

The gain on sale is taxed at the federal level at 15% if you are in the 15% tax bracket, and at 28% for all other tax brackets.

 

He is talking about selling. You don't pay sales tax when you sell.

 

ABSOLUTELY, POSITIVELY WRONG!

Federal income tax on long term capital gains is capped at 15%, so that's the most federal income tax you could be liable for, no matter what your tax bracket. Depending on your other income, you might owe less.

State and local income taxes, if any, are in addition but are generally at very low rates for long term capital gains.

 

Rules? What rules?

Find a dealer that pays cash when no one else is around. I've seen it happen many times.

Would it be considered dishonest? Yes. Is our government totally honest? No. It balances out in my opinion.

 

Exactly!

That is so true. Go to any coin show buy something with cash or sell something. people just put the money in there pocket.I have never seen anyone even write it down

smetimes the diference of what they bought it for,and sold it for is marginal

 

The federal long-term capital gains tax rate for collectibles is 28%, not 15. But if you are in a lower tax bracket (including your long-term capital gains), you will only be taxed at that rate. Note you must own the coins for at least 1 year to be considered a long-term capital gain. If owned less than 1 year, they will be taxed at your ordinary tax rate (which could be in excess of 28%). Then you would include your state income tax rate on those gains as well.

That being said, I think the vast majority of sales go unreported, especially if the proceeds are received in cash. Being a CPA for 25 years, I cannot recall a single case where someone reported a sale of coins or collectibles.

But everyone should keep detailed and accurate records or all purchases. So when a sale is made, you will have documentation of your cost basis. Especially if you sell on ebay, the IRS would love to require ebay to issue 1099's for the sales proceeds.

 

bmike:
Agreed on the ordinary tax rate, if they are collectibles.
If an investment............

 

Yes you do. The state Tax Assessor-Collector will knock on your door, and you pay. That's why you have to CHARGE sales tax when you sell in-state (depending on each state's laws).

 

That's the essence of the federal system, and one of our greatest strengths - one of the reasons America is so successful.

 

Treashunt:

There are 3 ways to report a sale of a collectible:

1. If you in the trade or business of selling collectibles (a dealer), it is reported on Schedule C (if unincorporated) and the net gain is taxable at ordinary rates PLUS self-employment taxes (OUCH!). Any loss is deductible against ordinary income.

2. If collectibles are a hobby for you, all income is reportable as ordinary income. Expenses are deductible as an itemized deduction but only up to the amount of the hobby income.

3. Finally, if the collectible is an investment, the sale is a capital gain or loss. Unfortunately, collectibles are taxed at a 28% rate as discussed in my previous post. (IRS Code Sec. 1(h)(5). They are not eligible for the reduced rate of 15% as are other investments (stocks, bonds, etc.)