Gold

How to Sell Gold Without Paying Taxes?

To sell gold without paying taxes is what most prospective sellers of gold dream about. Is that really possible, though? Yes, it is. In most countries, gold investments and capital gains are taxed at different rates. The customers have to pay tax at both the times, while buying gold and while selling it. At the time of buying gold, the customers have to pay a flat 3% goods and services tax. Similarly, while selling gold, the sellers have to pay some tax based on the duration of their holdings. Therefore, this can largely affect the overall gains that the investor earns while trading their gold investments. So, here in this article, we are discussing how you can sell gold without paying taxes. 

Tax Implications on Selling Gold

There are no taxes on selling gold. However, there are taxes on the capital gains that you make by selling your gold. There are other factors like the duration of your holdings and the type of account that you use for trading gold, that influence the amount of taxes that will be applicable on your capital gains. In India, there is a 20% tax and a 4% cess charge on the capital gains earned by selling gold, if you have held the gold assets for more than 3 years. If you have held the gold for less than 3 years, the taxes are applicable as per the income tax slabs. 

sell gold without paying taxes
Taxes on Gold Investments

How to Sell Gold Without Paying Taxes?

There are two ways of escaping the taxes on the capital gains earned by selling gold. It should be noted here that these ways to sell gold without paying taxes are totally legit and conform to the regulations set by the government or the organization overlooking the tax matters. 

Sell Gold without Paying Taxes: 1031 Exchange

1031 exchange refers to the section of the IRS documentation. In this section, IRS states that property or asset held for business or investment purposes can be exchanged to buy a new property or asset of the same kind. This means that you can buy gold with the capital gains of selling your old gold and postpone your tax bills. In this provision of the IRS, you can keep making such transactions without having any tax implications on them. You will need to pay the taxes only when you ultimately sell your gold for cash. 

Things to Know about 1031 Exchange

  • The asset that you are 1031 exchanging must have been used for business or investment purposes only. 
  • The replacement assets (the ones you are going to buy with the capital gains of your old investments) must be identified to the IRS within 45 days. 
  • The replacement assets must be bought within 180 days.
  • If the cost of the replacement asset is lesser than the asset that you have sold, it is known as boot. The boot is taxable. 
  • You can use a 1031 exchange even if your asset is mortgaged.

1031 exchanging your gold assets can be a great way of accumulating gold in your investment portfolio without incurring any goods and services tax or capital gains taxes. 

Sell Gold without Paying Taxes: Roth Accounts

A self-directed IRA is an individual retirement account that helps the account holder in having a variety of investments. The type of investments that the holder can keep in a self-directed IRA are the ones that are normally not allowed to be kept under regular individual retirement accounts. When the account holder sells the gold investments from their self-directed IRA accounts, the gains are not taxed.

Though these accounts are maintained by a trustee, the account holder has direct control over the type of investments being done, the sale of the assets, and other operations. Also, when the investments are held in the Roth accounts, the value of the assets keeps on increasing without attracting any tax implications. To open a self-directed individual retirement account, you need a certified IRA custodian. However, the custodian is not allowed to give any financial advice to the account holder. Please note here that you should look for a custodian who offers you the investment that you like. It is because not all custodians offer the same range of investments. 

It is very easy to be attracted to the numerous benefits of self-directed IRAs. However, there is an equal number of risks associated with SDIRAs. Here are some of the risks that you should be aware of. 

Fees

While opening an SDIRA account, you need to pay many different types of fees. These may include a first-year annual fee, establishment fees, investment bill-paying fees, renewal fees, and so on. Therefore, these fees may add up to decrease the number of your earnings.

Prohibited Transactions

SDIRAs have their own set of rules and regulations regarding the type of investments they support. Therefore, it is very important for account holders to follow the rules and stick to the guidelines while performing transactions to and from their retirement accounts. Failure to follow the rules may lead to tax implications and penalties on the account holder. 

Exit Plans

Exit plans are necessary to operate an SDIRA. While it is easy to get out of traditional investment options, getting out of an SDIRA can be problematic. So, it is advisable for account holders to be well-versed with the exit plan. 

Frauds

Sometimes, some custodians may offer you investments that they are not allowed to offer. Be aware of such custodians and make sure that the custodian that you choose is on the list of legitimate custodians. 

Research

While custodians may help you open an SDIRA, they are not allowed to offer you any financial advice. Therefore, it is very essential for account holders to do their due research and make informed decisions regarding their accounts and finances. 

Conclusion

While applying these measures to sell gold without paying taxes, the investors have to be very careful. This is because the government has put several terms and conditions to avail these services. So, even one case of non-adherence to these terms can lead to the cancellation of your tax exemptions of capital gains related to gold.