Did you know that owning gold bullion, coins and certificates was illegal in the United States for over 40 years? Beginning with an executive order signed by President Roosevelt in 1934, and later reaffirmed as law in the Gold Reserve Act of 1935, only the United States government was allowed to own gold and gold certificates.
The restrictions were enacted out of fears that private citizens were hoarding gold and making the economic depression the country was suffering worse. Laws were eventually relaxed in the mid-1960s and gold purchasing and ownership became legal for all US citizens in 1975. Since that time, gold has become an investment of choice for people all over the US.
Buying Gold as an Investment
Buying gold can offer a somewhat different type of ‘big purchase’ shopping experience than, say buying a new piece of furniture. For instance, if you want to buy a couch or a sectional, you choose how much you’re willing to spend, find a furniture shop you think will give you a good deal, head down to the showroom and then pick out the couch of your dreams. All that’s left to do is pay. If only it were so easy with gold.
Purchasing gold is in some ways like other large purchases, but calls for more market savvy. You still need a reliable vendor you can depend on to provide quality products, but the matter becomes more complicated if you’re buying gold as an investment.
Most gold-buyers pick up a bar of bullion or a set of numismatic coins in the hopes that they will appreciate in value, and rake in a tidy profit. Gold buyers do not use or consume the product, rather, they simply store it until it’s sold. Buy low and sell high—this is what makes buying gold closer to investing in stocks. (In fact, you can buy stocks in gold if you want to.)
The IRS
Because gold is an investment, the IRS (Internal Revenue Service) is eager to keep track of large amounts of gold you buy (for tax purposes.) The IRS is only interested in purchases over a threshold amount, and small purchases usually do not have to be reported to the IRS. Currently, gold, silver, palladium or platinum purchases of over $10,000, paid in cash or cash equivalents, have to be reported to the IRS.
If you’re considering making a sizeable investment in bullion, it’s a good idea to make sure you retain your receipts and supporting documents. The form the IRS requires for precious metal purchases over the $10,000 threshold, made in cash or cash equivalents, is Form 8300 (found here: http://www.irs.gov/pub/irs-pdf/f8300.pdf ). Take the time to fill it out properly to avoid the headache of an IRS audit.
Local Taxes
In addition to federal taxes, you may have to pay sales tax on gold purchases, though this varies by state. Some states exempt precious metal purchases for investment purchases. This exemption is subject to dollar limit, and applies to some sales taxes, not all. In fact, some cities have separate taxes on precious metals, in addition to state and federal requirements. Always check your local statutes to make sure you’re in compliance will appropriate laws.
If this seems complicated, don’t worry. No matter the size of your investment, be informed, transact only with reputable dealers, and keep all your receipts and you’ll be fine. As long as you do your homework, make a smart purchase, keep all relevant information and make an effort to comply with state and federal laws you should not run into any problems.