When Does the 28% Collectibles Tax Rate Apply to Gold? (w/Examples) + FAQs

Yes, the 28% tax rate can apply when you sell gold for a profit, but it is a maximum federal rate for long-term gains, not a flat tax. The core problem originates from the U.S. Internal Revenue Code, specifically IRC Section 1(h). This rule classifies physical gold and many gold-related investments as “collectibles,” subjecting their profits to a much higher potential tax rate than profits from stocks or bonds, which can unexpectedly shrink an investor’s returns.

This special tax treatment is becoming more relevant than ever. Recent studies show a surge in gold ownership among younger investors, with 60% of millennials now including gold in their portfolios. Many are drawn to gold’s tangibility and its role as a hedge against economic uncertainty, but they may be unaware of the tax headache that awaits when they decide to sell.

Here is what you will learn to solve these exact problems:

🪙 Why Your Gold is Taxed Differently Than Your Stocks: Discover the specific IRS rule that labels your gold a “collectible” and why this triggers a higher tax rate, solving the mystery of disappearing profits.
🤔 How to Know if the 28% Rate Applies to YOU: Learn that the 28% is a cap, not a flat tax, and see exactly how your personal income level determines the real rate you’ll pay on gold gains.
🦅 The Truth About American Eagle Coins: Unravel the common and costly confusion surrounding American Gold Eagles and find out if they are truly exempt from the collectibles tax when you sell them.
📝 Step-by-Step Tax Calculation Made Simple: Follow clear, real-world examples to calculate the tax on your gold sale, whether you bought it, inherited it, or received it as a gift.
💡 Smart Ways to Invest in Gold with Lower Taxes: Explore alternative gold investments, like mining stocks, that are not classified as collectibles and qualify for the much lower 0%, 15%, or 20% long-term capital gains rates.

The Tax Code’s Special Category: Why Gold Isn’t Treated Like a Stock

To understand gold’s tax treatment, you first need to grasp how the government taxes profits from any investment. This profit is called a “capital gain.” The tax you pay depends entirely on how long you owned the asset before selling it.

The One-Year Rule: Short-Term vs. Long-Term Gains

The Internal Revenue Service (IRS) divides all capital gains into two simple categories based on your “holding period”. The holding period is the amount of time you own an asset. It starts the day after you acquire it and includes the day you sell it.

If you hold an asset for one year or less, your profit is a short-term capital gain. This type of gain receives no special treatment. It is taxed at your ordinary income tax rate, which is the same rate that applies to your job salary, ranging from 10% up to 37%.

If you hold an asset for more than one year, your profit is a long-term capital gain. The government encourages long-term investing by offering much lower tax rates for these gains. For most investments like stocks, these special rates are 0%, 15%, or 20%, depending on your total taxable income.

The “Collectible” Classification That Changes Everything

Here is where gold takes a different path. Under IRC Section 408(m), the IRS defines a special class of assets called “collectibles”. This is not just a casual term; it is a specific legal category with major tax consequences.

The law is very clear about what falls into this group. The term “collectible” includes any work of art, rug, antique, stamp, coin, alcoholic beverage, or any metal or gem. Because of the phrase “any metal or gem,” the IRS classifies physical gold bullion, gold bars, and most gold coins as collectibles for tax purposes.

The government created this category because it views these assets differently from stocks or bonds. The rationale is that investing in a business (stocks) helps the economy grow, while holding a tangible asset like gold is seen more as speculation. To discourage this, Congress decided to apply a higher tax rate to the profits from selling collectibles.

Deconstructing the 28% Collectibles Tax Rate

The single biggest consequence of gold being a “collectible” is how its long-term gains are taxed. Instead of the favorable 0%, 15%, or 20% rates, profits from collectibles are subject to a special, higher rate.

It’s a Ceiling, Not a Flat Tax

Many investors mistakenly believe there is a flat 28% tax on all gold profits. This is incorrect and can lead to costly planning errors. The rule, found in IRC Section 1(h), states that long-term gains from collectibles are taxed at your ordinary income tax rate, up to a maximum of 28%.

This means you pay the lesser of your ordinary income tax rate or 28%. If your regular tax bracket is 10%, 12%, 22%, or 24%, you will pay that lower rate on your gold profit. If your tax bracket is 32%, 35%, or 37%, your tax rate on the gold profit is capped at 28%.

This creates a “tax penalty” for many middle-income investors. For example, an investor in the 24% tax bracket would pay only 15% on a long-term stock gain but would have to pay 24% on a long-term gold gain from a coin or bar. This nearly 10-point difference can significantly reduce your final take-home profit.

The Extra 3.8% Surtax for High Earners

On top of the collectibles tax, some investors may also have to pay the 3.8% Net Investment Income Tax (NIIT). This additional tax applies to investment income, including gains from gold, for individuals with a Modified Adjusted Gross Income (MAGI) over certain thresholds.

Those thresholds are $200,000 for single filers and $250,000 for married couples filing jointly. If this tax applies to you, your maximum federal tax rate on a long-term gold gain could effectively become 31.8% (28% + 3.8%).

Which Gold Investments Are Taxed as Collectibles?

The way your gold investment is taxed depends entirely on its form. Some types of gold fall under the harsh collectibles rule, while others are taxed just like regular stocks. Choosing the right one from the start is critical for tax planning.

Physical Gold and Gold ETFs: The Collectibles Category

If you can physically touch it, the IRS likely considers it a collectible. This includes the most common forms of direct gold ownership, such as gold bars, gold bullion, and most gold coins. When you sell these items for a profit after holding them for more than one year, that gain is subject to the 28% maximum collectibles tax rate.

This rule also extends to popular physically-backed gold Exchange-Traded Funds (ETFs), like the SPDR Gold Shares (GLD) and iShares Gold Trust (IAU). These funds are legally structured as trusts that hold physical gold bars in a vault. Each share you own represents a piece of that physical gold.

The IRS uses a “look-through” approach for these ETFs. It looks past the fact that you are trading a stock-like share and focuses on the underlying asset—the gold bullion. Because the shares represent ownership of a collectible, selling your ETF shares is taxed as if you sold a collectible, triggering the 28% maximum rate.

Gold Mining Stocks and Futures: The Tax-Friendly Alternatives

For investors who want exposure to the price of gold without the heavy tax burden, there are other options. These investments are not considered collectibles because you do not own any physical metal.

Gold Mining Stocks: You can buy shares in companies that mine gold, such as Newmont Corporation or Barrick Gold. You can also buy ETFs that hold a basket of these stocks, like the VanEck Gold Miners ETF (GDX). Profits from selling these stocks (if held for more than a year) are taxed at the standard long-term capital gains rates of 0%, 15%, or 20%.
Gold Futures Contracts: These are agreements to buy or sell gold at a future date. For tax purposes, many gold futures are classified as Section 1256 contracts. These have a unique tax advantage: gains are always treated as 60% long-term and 40% short-term, no matter how long you held the contract. This creates a blended rate that is often much lower than the 28% collectibles rate.

| Investment Type | Taxed as a Collectible? | Long-Term Gain Tax Rate (Federal) | |—|—| | Physical Gold (Bars, Coins) | Yes | Up to 28% | | Physically-Backed Gold ETF (GLD, IAU) | Yes | Up to 28% | | Gold Mining Stock (or GDX) | No | 0%, 15%, or 20% | | Gold Futures Contract | No | Blended 60/40 Rate |

The Great American Eagle Debate: An IRA Exception That Causes Confusion

One of the most misunderstood topics in gold taxation involves the popular American Gold Eagle coin, minted by the U.S. Mint. A specific rule allows these coins to be held in an Individual Retirement Account (IRA), leading many to believe they are exempt from the collectibles tax when sold. This is a costly mistake.

Two Different Laws for Two Different Purposes

The confusion comes from two separate parts of the tax code that treat the same coin differently. First, IRC Section 408(m) generally prohibits holding collectibles in an IRA. However, Congress created a specific exception for certain U.S.-minted coins, including American Gold Eagles, allowing them to be placed in a Self-Directed IRA.

Because of this IRA-specific rule, many investors assume American Gold Eagles are not considered collectibles for any tax purpose. This is false. The tax rate on capital gains is governed by a completely different law, IRC Section 1(h), which does not contain this exception.

The Final Verdict on Selling American Gold Eagles

The rule is simple and absolute. The exception for American Gold Eagles applies only to their eligibility for an IRA.

When you sell an American Gold Eagle coin from a regular, non-retirement account, it is treated just like any other piece of gold. The profit is considered a gain from the sale of a collectible and is subject to the 28% maximum federal tax rate.

How to Calculate the Tax on Your Gold Sale: 3 Scenarios

Calculating the tax you owe involves three main steps: determining your cost basis, calculating your gain, and applying the correct tax rate. Let’s walk through the three most common scenarios.

First, What Is Your “Cost Basis”?

Your cost basis is the starting point for measuring your profit. It is the total amount you have invested in an asset for tax purposes. A higher basis is better because it means a smaller taxable gain. How you determine your basis depends on how you got the gold.

If You Bought It: The basis is what you paid for it, plus any extra costs like commissions or fees.
If It Was a Gift: You generally take on the donor’s original cost basis. This is called a “carryover basis”.
If You Inherited It: You get a huge tax advantage called a “stepped-up basis.” Your basis becomes the fair market value of the gold on the date the original owner passed away. This can erase decades of taxable gains.

Scenario 1: The Retiree Selling Inherited Coins

Maria inherited a small collection of gold coins from her father. Her father bought them in 1990 for $5,000. When he passed away in 2024, the coins were appraised at $22,000. In 2025, Maria sells the collection for $25,000. Her other taxable income for the year is $50,000, placing her in the 22% tax bracket.

Calculation Step	Action & Consequence
1. Determine Cost Basis	Action: Maria uses the “stepped-up basis” rule for inherited property. Consequence: Her cost basis is $22,000 (the value at death), not the original $5,000 purchase price. This erases $17,000 of appreciation from taxation.
2. Calculate Capital Gain	Action: Maria subtracts her stepped-up basis from the sale price ($25,000 – $22,000). Consequence: Her taxable long-term capital gain is only $3,000.
3. Apply the Correct Tax Rate	Action: The gain is from a collectible. Maria’s ordinary tax rate is 22%, which is less than the 28% cap. Consequence: Her gain is taxed at 22%.
4. Final Tax Owed	Action: Maria calculates the tax: $3,000 x 22%. Consequence: She owes $660 in federal tax on the sale.

Scenario 2: The Mid-Career Professional Selling a Gold ETF

David is a single filer with $120,000 in taxable income, putting him in the 24% tax bracket. Three years ago, he bought shares in a physically-backed gold ETF (like GLD) for $10,000. He just sold them for $15,000 to fund a home renovation.

Calculation Step	Action & Consequence
1. Determine Cost Basis	Action: David uses his purchase price as his basis. Consequence: His cost basis is $10,000.
2. Calculate Capital Gain	Action: David subtracts his basis from the sale price ($15,000 – $10,000). Consequence: His taxable long-term capital gain is $5,000.
3. Apply the Correct Tax Rate	Action: The gain is from a physically-backed ETF, which is taxed as a collectible. David’s ordinary tax rate is 24%, which is less than the 28% cap. Consequence: His gain is taxed at 24%, not the 15% rate that would apply to a stock.
4. Final Tax Owed	Action: David calculates the tax: $5,000 x 24%. Consequence: He owes $1,200 in federal tax. If this had been a stock ETF, his tax would have been only $750 ($5,000 x 15%).

Scenario 3: The High-Income Investor Selling Gold Bars

Susan and Tom are married, file jointly, and have a taxable income of $700,000, placing them in the 35% tax bracket. They sold several gold bars they had held for five years, realizing a long-term capital gain of $50,000.

Calculation Step	Action & Consequence
1. Determine Cost Basis	Action: They use their original purchase price plus fees. Consequence: Their cost basis is established from their purchase records.
2. Calculate Capital Gain	Action: They subtract their basis from the sale price. Consequence: Their taxable long-term capital gain is $50,000.
3. Apply the Correct Tax Rate	Action: The gain is from a collectible. Their ordinary tax rate is 35%, which is higher than the 28% cap. Consequence: Their gain is taxed at the 28% maximum rate.
4. Consider the NIIT	Action: Their income is above the $250,000 threshold for joint filers. Consequence: They must add the 3.8% Net Investment Income Tax, making their effective rate 31.8%.
5. Final Tax Owed	Action: They calculate the total tax: $50,000 x 31.8%. Consequence: They owe $15,900 in federal tax on their gold profit.

Reporting Your Gold Sale to the IRS: Forms and Procedures

Calculating your tax is only half the battle; you must report the sale correctly to the IRS. Failure to report a profitable sale is considered tax evasion, even if you do not receive a tax form from the buyer.

The Taxpayer’s Unavoidable Duty to Report

Every single sale of gold held for investment must be reported on your tax return, regardless of the amount. The responsibility falls entirely on you, the seller. You will use two main forms to do this.

Form 8949, Sales and Other Dispositions of Capital Assets: This is where you list the details of each individual sale. For each transaction, you must provide a description of the asset (e.g., “10 oz Gold Bar”), the date you acquired it, the date you sold it, the sale price, and your cost basis. The form then guides you to calculate the gain or loss for that specific transaction.
Schedule D, Capital Gains and Losses: The totals from all your Form 8949s are carried over to Schedule D. This form summarizes all your capital gains and losses for the year—from stocks, bonds, real estate, and collectibles. The final net gain or loss from Schedule D is then entered on your main Form 1040 tax return.

Dealer Reporting: The Confusing World of Form 1099-B

Sometimes, the dealer or broker who buys your gold is required to send you and the IRS a Form 1099-B. This form reports the gross proceeds from the sale. However, the rules for when a dealer must issue this form are very specific and surprisingly narrow.

A dealer is only required to file a Form 1099-B for the sale of specific gold products in certain quantities.

Product Sold to a Dealer	Minimum Quantity for 1099-B Reporting
Gold Bars (of at least.995 fineness)	Total of 1 kilogram (32.15 oz) or more
Canadian Gold Maple Leaf (1 oz coins)	25 coins or more
South African Krugerrand (1 oz coins)	25 coins or more
Mexican Onza (1 oz coins)	25 coins or more
American Gold Eagle (any size)	*No reporting requirement*

Source:

This creates a significant “reporting gap.” You could sell 20 American Gold Eagle coins for a large profit, and the dealer would not be required to send a Form 1099-B. This does not mean the sale is tax-free. You are still legally required to report the gain on your own tax return using Form 8949 and Schedule D.

The Impact of State Taxes on Your Gold Profits

Federal tax is only one piece of the puzzle. Most states that have an income tax also tax capital gains, and their rules can add a significant amount to your total tax bill.

How States Handle Capital Gains

Unlike the federal system, most states do not offer lower preferential rates for long-term capital gains. In the majority of states, a capital gain is simply treated as regular income and taxed at the state’s standard income tax rates. This means your gold profit could be taxed at your state’s top marginal rate.

For example, a state like California taxes all capital gains as ordinary income, with rates as high as 13.3%. If you live there, your combined top federal and state tax rate on a gold sale could exceed 45% (31.8% federal + 13.3% state).

States With No Capital Gains Tax

A handful of states do not impose any state-level tax on capital gains because they have no state income tax. As of 2025, these states are:

Alaska
Florida
Nevada
New Hampshire (taxes interest and dividends only)
South Dakota
Tennessee
Texas
Wyoming

Source:

Living in one of these states can provide a significant tax advantage when selling gold, as you would only be subject to the federal collectibles tax.

Common Mistakes, Strategic Choices, and Key Considerations

Navigating gold taxes requires careful attention to detail. A few common mistakes can be costly, while understanding your options can save you a significant amount of money.

Top 5 Mistakes to Avoid

Assuming the 28% Rate is Flat: Believing you will automatically pay 28% is a frequent error. You could pay much less if you are in a lower tax bracket, but you will never pay more than 28% in federal collectibles tax on a long-term gain.
Confusing the American Eagle IRA Rule: Thinking your American Gold Eagles are exempt from capital gains tax because they are allowed in an IRA is a widespread and incorrect assumption that can lead to under-reporting income.
Forgetting About State Taxes: Many investors focus only on the federal rate and are surprised by a large state tax bill. Always factor in your state’s rules when estimating the total tax impact.
Failing to Keep Good Records: If you cannot prove your cost basis, the IRS may assume it is zero, forcing you to pay tax on the entire sale price. Keep detailed records of every purchase, including dates, prices, and any fees.
Ignoring the Holding Period: Selling gold even one day before you have held it for more than a year will convert a long-term gain into a short-term gain, subjecting it to much higher ordinary income tax rates.

Do’s and Don’ts for Gold Investors

Do’s	Don’ts
Do keep meticulous records of every purchase, including receipts, dates, and fees. This is your proof of cost basis.	Don’t assume that no 1099-B from a dealer means you don’t have to report the sale. You always do.
Do get an immediate appraisal for any inherited gold to establish its “stepped-up basis.”	Don’t store gold belonging to your Self-Directed IRA at home. It must be held by an IRS-approved custodian.
Do understand which tax bracket you are in to know the actual rate you will pay on a collectibles gain.	Don’t mix up the tax rules for physical gold with the rules for gold mining stocks, which are much more favorable.
Do consider holding your gold for more than one year to qualify for the (capped) long-term rate.	Don’t forget to factor in state income taxes, which can add a significant percentage to your total tax bill.
Do consult a tax professional before selling a large or complex gold holding.	Don’t dispose of records for gifted gold; you will need the original owner’s cost basis when you sell.

Pros and Cons of Different Gold Investment Types

Physical Gold & ETFs (Collectibles)	Gold Mining Stocks (Securities)
Pro: Direct exposure to the price of gold. You own the actual metal or a direct claim to it.	Pro: Favorable tax treatment. Gains are taxed at the lower 0%, 15%, or 20% long-term capital gains rates.
Pro: Acts as a tangible store of value outside the traditional financial system.	Pro: Potential for dividends and growth beyond the price of gold if the company is well-managed.
Con: Unfavorable tax treatment. Long-term gains are taxed at a higher maximum rate of 28%.	Con: Indirect exposure. Stock price is affected by company management, operational risks, and labor issues, not just the gold price.
Con: Incurs storage and insurance costs for physical holdings, which are generally not tax-deductible.	Con: Higher volatility. Mining stocks can be more volatile than the price of gold itself due to market and industry risks.
Con: Less liquid than stocks, especially for large amounts of physical metal.	Con: Does not provide the same “safe haven” benefit of owning a tangible asset outside the financial system.

Frequently Asked Questions (FAQs)

Is the 28% tax on the total sale price or just the profit? No. The tax is only on the profit, which is your capital gain. This is calculated by subtracting your cost basis (what you paid) from the sale price.

If my regular tax rate is 15%, do I still pay 28% on a long-term gold sale? No. You would pay your regular tax rate of 15%. The 28% rate is a maximum cap. You always pay the lesser of your ordinary income tax rate or 28% on long-term collectible gains.

Are American Gold Eagles really taxed as collectibles when I sell them? Yes. Although they have a special exception allowing them inside an IRA, when you sell them from a personal account, the profit is taxed as a collectible at the maximum 28% rate.

How is a gold ETF like GLD taxed? Yes, it is taxed as a collectible. Because the fund holds physical gold, the IRS “looks through” the ETF structure. Long-term gains are subject to the 28% maximum rate.

What happens if I sell my gold at a loss? Yes, you can deduct the loss if it was held as an investment. A capital loss can offset other capital gains. You can also deduct up to $3,000 of net capital losses against your ordinary income each year.

Do I have to pay state taxes on my gold profit? Yes, in most states. The majority of states with an income tax will tax your capital gain as regular income. Only a few states have no income tax and therefore no state-level capital gains tax.

My dealer didn’t give me a Form 1099-B. Do I still have to report the sale? Yes. You are legally required to report all capital gains on your tax return, whether or not you receive a tax form from the buyer. The responsibility to report is always on you, the seller.