Due to higher technology demands, inflation concerns, and rising geopolitical uncertainty, investors are increasingly seeking hard assets for peace of mind.
Gold, silver, platinum, palladium and other precious metals have increased in demand and risen to record prices. For instance, gold appreciated over 65% in 2025 and silver appreciated 144%. These trends continue in 2026, with gold up 13% and silver rising another 19% as we end January.
With precious metals at record levels, many of your clients may be anxious to take some chips off the table to raise cash or to rebalance their portfolios.
Just make sure they're aware that the IRS considers most precious metals to be "collectibles," so holders are generally taxed at higher rates than for capital gains from stocks, bonds, and other securities.
Collectibles classification and applicable rates
Most types of gold, silver, and other precious metals and coins that are held for investment are classified as collectibles under Internal Revenue Code Section 408(m). As a result, short-term gains from sales of collectibles are taxed at the taxpayer's ordinary income rates. Long-term gains (held for over one year) on these assets do not qualify for the standard 0%, 15% or 20% capital gains rates that apply to most capital gains. Instead, they are subject to a maximum federal rate of 28%.
This 28% rate acts as a ceiling rate: Taxpayers in lower tax brackets will pay a lower rate, while higher-income taxpayers are limited to the 28% maximum on long-term collectible gains. There is a limited exception under IRC Section 408(m)(3) to the "collectibles" definition for: American Gold Eagle coins, American Silver dollar coins, Platinum coins described in 31 USC Section 5112(k) and coins issued by any U.S. state, if held by an IRA. These coins are taxed at a 20% or lower capital gain rate, depending on the taxpayer's adjusted gross income at the time of an IRA distribution.
Additionally, higher-income individuals may owe the 3.8% Net Investment Income Tax if their
Accounting method's effect on gain
The IRS allows taxpayers to use the specific identification method — an ordering methodology for investors — to determine the cost basis when selling precious metals if the metals can be identified adequately. Otherwise, the default method is First-In, First-Out.
In cases when the value of precious metals has appreciated drastically, FIFO usually results in a larger recognized gain for the taxpayer than the specific identification method. With current prices at record highs, using the specific identification method to sell recently acquired items first can help your clients minimize taxable gains on these metals. For businesses holding precious metals as inventory, the Last-In, First-Out method may be used if a valid LIFO election is made, and if other requirements are met. This accounting method typically results in a lower taxable gain. However, LIFO is not generally available for precious metals held as
Coins and bullion received as a gift vs. inheritance
If your client received gold as a gift, their cost basis is generally tied to the donor's purchase price, not to the value on the date they received it. This can dramatically raise your client's tax hit upon sale. If the gold came through an inheritance, however, it will usually receive a step-up in basis to its fair market value at the time of the original owner's death. This can dramatically reduce your client's tax obligation upon sale.
Some of your clients may be holding gold and silver through exchange-traded funds. The tax treatment for sales of these funds depends on the ETF's structure.
Common bullion-backed ETFs are often organized as grantor trusts, meaning shareholders are considered direct owners of the underlying metal. Consequently, gains on these ETF shares are generally taxed under the collectibles rules, including the 28% maximum long-term rate. This differs from most equity ETFs, which typically qualify for standard long-term capital gains treatment with a maximum 20% capital gain rate. Accordingly, you and your clients should review each fund's tax classification before investing or selling.
In light of the recent sell-off in gold and silver, clients may consider selling off any coins or bullion that have dropped below their cost basis and claim a tax loss. They can then immediately repurchase the same or other metals without concern for IRC Section 1091, which disallows losses on "wash sales" of stock or securities, since physical gold, silver and other precious metals are not subject to this rule.
Precious metal ETFs are generally not treated as securities, so they are not subject to IRC Section 1091, unless it is a registered investment company or otherwise holds securities rather than physical metal.
For more information on sales tax in your state, see
1099 reporting
Sales of precious metals are reported by sellers on
Although some dealers must issue Form 1099-B for certain transactions many sales do not trigger mandatory reporting by the seller. Regardless, taxpayers remain responsible for reporting all taxable gains.
Tax deferral opportunities
In certain circumstances, taxpayers may be able to defer recognition of taxable gains from the sale of precious metals through strategic planning. From a planning perspective, taxpayers may consider timing sales, using capital losses to offset gains and evaluating the impact of the collectibles rate before liquidating large positions.
One potential deferral option involves contributing the metals to a partnership prior to sale such as a qualified opportunity fund. When structured properly, the resulting Schedule K-1 reporting may extend the qualified opportunity zone reinvestment deadline to June or September of 2027 for calendar 2026 sales, rather than the standard 180-day period. This approach may also allow taxpayers to take advantage of opportunity zone 2.0 provisions, including a potential five-year federal (and possible state-level) gain deferral. For more opportunity zone planning information,
Real-world example
To illustrate, Client X inherited a coin collection from his father in
In total he owns the following:
Source: HCVT, LLP 2026
If Client X sold 50 gold coins, his taxable gain would be $29,500 (50 x $590 basis difference) lower by simply selling their more recently purchased coins first, rather than selling the lower basis inherited coins.
If Client X sells all of the non-inherited coins, his tax gain will be approximately $199,700 based on today's spot price. Note: Coins issued by the U.S. Mint (and other foreign mints) typically trade at a premium compared to "blanks" (non-legal coins) and bullion,
Although Client X is eager to capitalize on the recent surge in precious metal prices, he is understandably less enthusiastic about the tax consequences that accompany a sizable gain. From a planning standpoint, this creates an opportunity. We reviewed the option of deferring recognition by reinvesting the gain into a captive QOF within 180 days of the sale. This approach allowed Client X to redirect proceeds into real estate or an operating business while postponing current tax and potentially building up tax free gains — provided he holds the OZ investment for at least 10 years and all statutory requirements are met.
If Client X sells the coins outright today, his only option is an OZ 1.0 fund, with deferred taxes becoming payable April 15, 2027. With some pre-sale planning, however, a more favorable outcome becomes available. By first forming a new LLC/partnership and contributing the coins to the partnership before the sale, the gain will be reported on a K-1 rather than directly on Client X's individual return.
This structure permits Client X to elect the start of the 180-day reinvestment window on either Dec. 31, 2026 (the partnership's year-end) or March 15, 2027 (the partnership return due date). This timing difference is meaningful. It effectively extends the funding window into 2027 and opens the door to OZ 2.0. The result is a five-year deferral period, a 10% basis step-up after five years, and taxation on only 90% of the original gain.
Although gold and silver are commonly viewed as safe stores of value, their tax treatment is more complex than that of traditional securities. Physical precious metals and many bullion-backed ETFs are classified as collectibles, subjecting long-term gains to a higher maximum federal rate of 28%, with potential exposure to the NIIT and state taxes.
Given the recent dramatic price movements and increased investor activity, make sure clients are aware of these rules to avoid unexpected tax consequences.
— With additional reporting by Emily Cook and Kaitlynn Robertson, tax interns in the Salt Lake City office of HCVT
