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Capital Gains Tax Guide for Investors


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Capital Gains Tax Rates on Collectibles
Investing In Art and Collectibles

If you invest in art, gold, silver, coins, stamps, wine, books, or virtually anything else that can be labeled a collectible, then the special collectible capital gains taxes probably apply to you. These rates are higher than regular capital gains taxes.

As you learned in Investing in Collectibles, owning collectibles such as bottles of wine, rare stamps, books, coins, or antiques, is now not only popular, it's possible in countries such as the United States and Great Britain to hold these assets in tax-advantaged retirement accounts. For most investors, though, they are more likely to invest in collectibles without the protection of a tax shelter. They buy great works of art, for instance, and they or their heirs sell it several decades later, generating large capital gains.

How are the capital gains tax rates for collectibles calculated? Currently, collectibles are taxed in two different tax brackets:

  • Short-Term Collectible Capital Gains Tax Rates: Collectibles held less than one year are taxed at personal income tax rates, just like short-term capital gains taxes on stocks or bonds.

  • Long-Term Collectible Capital Gains Tax Rates:: Collectibles held one year or longer are taxed at 28%. Thus, if you bought a Picasso for $100,000 several decades ago and sold it for $20,000,000 today, you would owe $5,572,000 in capital gains taxes ($20,000,000 sales price - $100,000 purchase price = $19,900,000 capital gain x 28% = $5,572,000 capital gains tax liability).

Gold and Silver Are Taxed as Collectibles

Gold and silver bullion, such as American Eagle gold coins, Canadian Gold Maple Leaf coins, and South African Krugerrand gold coins, are taxed at the same capital gains rate as collectibles. This includes Gold ETFs and Silver ETFs. Investors make a very real mistake assuming they will be able to pay the lower capital gains tax rate that is paid on stocks and bonds, sometimes causing them to experience painful surprises come tax day.

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