Capital Gains Tax on Gold and Silver: The 28% Collectibles Rule

Selling physical gold or silver held outside a retirement account triggers a specific set of federal tax rules distinct from the long-term capital gains rules that apply to stocks and mutual funds. The core mechanic is the 28 percent maximum federal rate on collectibles gain under IRC Section 1(h)(4). This guide walks through the statute, the holding period rule, the basis calculation, deductible losses, the exact forms used to report the sale, dealer 1099-B triggers, and the state layer that adds on top. The rules are settled and well documented, but the details determine the number written on the check.

The 28 percent collectibles rate in the code

The 28 percent rate on gold and silver is not a colloquial round number. It sits in the statute at IRC Section 1(h)(1)(F), which caps the federal rate on 28-percent rate gain at 28 percent of the amount of taxable income above the amounts covered by preceding subparagraphs. IRC Section 1(h)(4) defines 28-percent rate gain as the excess of collectibles gain plus Section 1202 gain over collectibles loss, net short-term capital loss, and certain long-term capital loss carryovers (26 U.S. Code Section 1).

IRC Section 1(h)(5)(A) then defines collectibles gain and collectibles loss by cross-reference to Section 408(m), without regard to paragraph (3). Section 408(m)(2) lists collectibles: any work of art, any rug or antique, any metal or gem, any stamp or coin, any alcoholic beverage, or any other tangible personal property specified for that purpose by the Secretary. Paragraph (3) is the narrow IRA carve-out that lets certain bullion and coins meeting fineness standards be held in an IRA without being treated as a collectible acquisition. The without regard to paragraph (3) language in Section 1(h)(5) means the IRA carve-out has no effect on the 28-percent rate analysis outside an IRA. In a taxable account, IRA-eligible gold and silver remain collectibles for tax purposes.

The IRS restates the rule in plain language on its Topic pages. IRS Topic 409 says: net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28 percent rate (IRS Topic 409). The rate is a maximum, not a fixed rate. A taxpayer whose ordinary bracket is 22 percent pays 22 percent on collectibles gain because 22 is below 28. A taxpayer in the 32 percent ordinary bracket pays 28 percent because 28 is below 32. A taxpayer whose ordinary rate exactly straddles the cap pays the cap at 28.

Short-term versus long-term holding period

Only long-term gain qualifies for the 28 percent collectibles cap. Gain on metals held one year or less is short-term capital gain and is taxed at the seller’s ordinary income tax rate, which for federal purposes ranges from 10 to 37 percent in 2025 (IRS 2025 rates).

IRS Topic 409 describes the holding period rule precisely: the period runs from the day after the day the asset was acquired up to and including the day it was disposed of. A coin purchased on March 15, 2024 and sold on March 15, 2025 has been held exactly one year, which is not more than one year, so the gain is short-term. Selling one day later, on March 16, 2025, produces long-term gain because the holding period exceeds one year.

The date used is trade date, not settlement date, and each lot has its own holding period. A seller who bought silver in three separate purchases and later sells part of the position must identify which lot is being sold. The default identification rule is first-in, first-out under Treasury Regulations Section 1.1012-1, unless the taxpayer specifically identifies a different lot at or before the time of sale. Specific identification is preferable when older lots have a lower basis (larger gain) and the seller wants to sell higher-basis newer lots to reduce the current-year gain.

Cost basis: what you paid and what you can add

Basis is the number the IRS subtracts from proceeds to compute gain or loss. For purchased metals, IRS Publication 551 defines cost basis as the amount paid to acquire the asset, including certain acquisition costs (IRS Publication 551).

Two special basis rules matter for inherited or gifted metals. For inherited property, IRC Section 1014 gives the heir a stepped-up basis equal to fair market value on the date of the decedent’s death. A parent who bought a 10-ounce gold bar in 2005 for 5,000 dollars and passed it to a child in 2024 when the bar was worth 20,000 dollars gives the child a 20,000 dollar basis. If the child sells the next day for 20,000 dollars, gain is zero. For gifted property (donor living), the recipient generally takes the donor’s basis under IRC Section 1015; the step-up does not apply.

Records to keep: dealer invoice, shipping receipt, sales tax receipt, wire confirmation for the purchase payment, and for inherited metal, the appraisal or contemporaneous fair market value evidence for the date of death. The IRS burden of proof on basis rests with the taxpayer under IRC Section 6001. A taxpayer who cannot substantiate basis risks a determination that basis is zero, which turns all proceeds into gain.

Losses, offsets, and carryforwards

Losses on gold and silver held for investment are deductible; losses on metals held for personal use are not. IRC Section 165(c)(2) allows individual deductions for losses incurred in a transaction entered into for profit. Personal-use property loss is disallowed under IRC Section 165(c)(3) except for casualty and theft in a federally declared disaster area. Jewelry worn regularly is a facts-and-circumstances judgment call and often treated as personal use; a coin held in a vault as an investment is clearly investment property.

When the sale is deductible, IRC Sections 1211 and 1212 govern how losses interact with gains. Capital losses first offset capital gains of the same character. Long-term losses first offset long-term gains, including collectibles gain. Short-term losses first offset short-term gains. Any remaining net capital loss can offset up to 3,000 dollars of ordinary income per year (1,500 dollars if married filing separately) under IRC Section 1211(b). Excess loss carries forward indefinitely under IRC Section 1212(b) and retains its short-term or long-term character in each future year.

Reporting on Form 8949 and Schedule D

Every sale of physical gold or silver held as a capital asset is reported on IRS Form 8949, Sales and Other Dispositions of Capital Assets (Form 8949), with totals flowing to Schedule D, Capital Gains and Losses (Schedule D).

1. Enter each sale on Form 8949. Long-term transactions (held more than one year) go in Part II. Short-term transactions go in Part I. Each row lists description, date acquired, date sold, proceeds, cost basis, adjustment code, adjustment amount, and gain or loss.
2. Select the correct box. Box A, B, or C in Part I and Box D, E, or F in Part II identify whether the transaction was reported on a 1099-B and whether basis was reported to the IRS. Most private and dealer sales of physical metals to individual sellers fall in Box F (long-term, not reported on 1099-B) because dealer 1099-B rarely applies to typical retail-quantity sales.
3. Total each Part. Sum proceeds, basis, adjustments, and gain or loss for each Box within each Part.
4. Carry totals to Schedule D. Long-term totals from Form 8949 Part II flow to Schedule D Part II lines 8a through 10. Short-term totals flow to Part I lines 1a through 3.
5. Complete the 28% Rate Gain Worksheet. The Schedule D instructions include a 28% Rate Gain Worksheet that isolates the collectibles portion of long-term gain. The result feeds Schedule D line 18 as 28-percent rate gain.
6. Apply the Schedule D Tax Worksheet. The Schedule D Tax Worksheet in the Form 1040 instructions computes the tax by applying the 28 percent cap to the amount on line 18, the 0/15/20 percent rate to non-collectibles long-term gain on line 19, and ordinary rates to remaining income.

The mechanical result: the 28 percent cap under IRC 1(h)(4) does not appear as a checkbox on the tax return. It emerges from the worksheet math. A taxpayer whose ordinary bracket is below 28 percent sees the lower ordinary rate applied automatically. A taxpayer above 28 percent sees the cap bind. There is nothing to elect and nothing to opt out of.

Dealer Form 1099-B: what triggers reporting

A common misconception is that every sale of gold or silver to a dealer generates a 1099-B that the IRS matches to the taxpayer’s return. The reality is narrower. Dealer 1099-B reporting for precious metals is governed by IRC Section 6045 and long-standing IRS regulations for broker reporting, which apply only to specific items in specific quantities.

Commonly reportable sales (dealer files Form 1099-B):

• Gold bars, 25 ounces or more of 0.995 or higher fineness (typically satisfied by a single 1-kilogram or larger bar aggregation)
• Gold bars, one or more 100-ounce bars
• Silver bars, 1,000 ounces or more of 0.999 fineness
• Platinum bars, 25 ounces or more of 0.9995 fineness
• Palladium bars, 100 ounces or more of 0.9995 fineness
• Krugerrand, Maple Leaf, or Mexican Onza gold coins in quantities of 25 or more of a single item

Commonly not reportable (no dealer 1099-B regardless of quantity): American Gold Eagle coins, American Silver Eagle coins, American Buffalo gold coins, American Platinum Eagle coins, and fractional coins in most sizes. The exemption for these items reflects the way the regulation was originally drafted around specific commodity futures contract deliverables.

Whether or not the dealer files a 1099-B, the taxpayer’s obligation to report the sale on Form 8949 is unchanged. A 1099-B is an information return that helps the IRS match reported income; the underlying reporting obligation belongs to the taxpayer under IRC Section 6001. Sellers who receive a Form 1099-B should confirm proceeds match their own records and then report the same figure on Form 8949 in the appropriate Box A, B, D, or E depending on basis reporting.

The state income tax layer

The 28 percent federal cap does not include state tax. Most states tax capital gain, including collectibles gain, as ordinary state income at the resident state’s rate. In 2025, top state ordinary rates range from about 2.9 percent in North Dakota to about 13.3 percent in California for the highest earners. Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) impose no personal income tax and therefore no state layer on the collectibles gain.

A handful of states offer partial capital gain deductions or exclusions that can reduce the effective state rate on gold and silver sales. Rules vary and change with each state legislative session. Sellers who relocate between the purchase year and the sale year should model both possible state layers because most states impose tax based on residency at the time of sale, not at the time of purchase, and the timing of a change of domicile is fact-sensitive under state case law.

Getting several written offers before selling is often the largest single dollar move a seller can make, and it also produces the clean paper trail the taxable-account reporting requires. Sellers can post one free request on Goldiew’s sell-gold hub to receive up to 15 sealed offers from verified buyers, or browse local dealers on the Goldiew marketplace to gather quotes directly. Each written offer becomes part of the sale-record file for basis reconstruction and audit defense.

The 3.8 percent Net Investment Income Tax

IRC Section 1411 imposes an additional 3.8 percent Net Investment Income Tax on net investment income for taxpayers with modified adjusted gross income above 200,000 dollars single, 250,000 dollars married filing jointly, and 125,000 dollars married filing separately (26 U.S. Code Section 1411). Capital gain on collectibles is net investment income.

The NIIT is reported on Form 8960. It applies to the lesser of net investment income and the excess of modified adjusted gross income over the threshold. Stacked on top of the 28 percent maximum federal collectibles rate, the combined federal maximum on collectibles gain for a high-income taxpayer becomes 31.8 percent (28 plus 3.8), before state tax. A California resident at the top of both the federal and state schedules can face a combined marginal rate above 45 percent on collectibles gain, illustrating why holding period, basis, and loss harvesting matter.

Related on Goldiew

These adjacent guides go deeper on connected pieces of the same tax picture:

• Gold in an IRA vs a taxable account: the 28 percent collectibles rate math works through the asset-location comparison across income brackets and holding periods.
• Gold IRA vs the collectibles 28 percent rate: the IRC 408(m)(3) carve-out explains why gold held inside an IRA is not treated as a collectible acquisition.
• How to get maximum value when selling gold covers the pricing and paperwork side of the sale that feeds the Form 8949 record.
• Fees and costs topic archive for related coverage of transaction cost, dealer premiums, and after-tax outcomes.