A question that comes up frequently at Gold Buyers of America’s stores is whether or not the gold seller will need to pay taxes on the sale of their unwanted gold, silver or platinum jewelry. According to the U.S. Internal Revenue Service (IRS), gold is considered a capital asset, with financial gain from the sale of gold considered capital gain. Earnings from the sale of gold jewelry is therefore seen as taxable income.
Selling Gold Jewelry
Gold jewelry that is sold for cash is considered to be scrap precious metal. As such, gold jewelry can be in just about any condition, including scratched, broken or tarnished. Different gold buyers pay different per-ounce rates for gold jewelry. This figure is typically based on the current price of gold and the karat weight of the jewelry.
Gold Dealer Tax Reporting Law
Gold Buyers are not required to report an individual's sale of gold except in instances where more than 25 oz. of South African Krugerrands, Canadian Maple Leafs and Mexican Gold Onzas gold are sold. These types of gold are considered to be a regulated commodity, and the sale of such items must be reported by gold dealers to the IRS. The reporting of capital gain from the sale of all other forms of gold is left up to the individual seller to report.
Figuring Tax on Gain
Capital gains on collectibles, including gold jewelry, are taxed at 28 percent. To calculate the amount of tax you owe on the proceeds of selling gold jewelry, determine your basis in the item -- in other words, what the item is worth at current fair market value minus the price you originally paid for the jewelry. If the gold jewelry you are selling was a gift, your basis is tabulated on what the gift-giver paid for the jewelry. If you inherited the gold jewelry you're selling, your basis is the current fair market value as determined by an appraiser. For example, if you paid $100 for a gold chain and later sold it to a gold buyer for $200, your capital gain on the sale of your jewelry is $100, and you will owe $28 in taxes.
How to Report Gain
Use IRS Schedule D of Form 1040 to report your capital gains earnings from the sale of gold jewelry. You may deduct expenses associated with the sale of the gold jewelry, such as dealer commissions and appraisals.