Tax is one of the most important cost considerations when it comes to making investment decisions. Generally, items considered as luxury or for the rich and wealthy have a higher tax level as compared to items considered as necessity. Consequently, in most tax jurisdictions, gold is one of those items that is considered as such and experiences the highest tax bracket.
How do you ensure that your gold investment fetches the lowest tax liability?
The following are a few tips that can help you lower your gold tax liability:
Buy Gold in the Cheapest Form Possible
Gold varies so much in price not based on its intrinsic form but its extrinsic form. Intrinsic form is the basic form of gold as metal in terms of its purity levels. The extrinsic form of gold is the minted design of gold. There are various extrinsic forms such as bars, coins, jewels, ornaments etc. Bars are cheaper than coins in that they do not require sophisticated minting and artistic techniques. Similarly, coins are much cheaper than jewels and ornaments since jewels and ornaments involve specialized minting and artistic design techniques. Since the tax percentage is fixed, then, the higher the price of gold the more likely would be the tax amount.
The best way to invest in physical gold as to minimize tax liability involves the following options; gold bars, krugerrands and gold sovereigns.
Gold bars – Gold bars are the cheapest of the three options to invest in. However, some few notable observations need to be made. First and foremost, the price of one ounce of gold bar and that of a one ounce of Krugerrand is basically the same in most markets. However, as the quantity of purchase increases, the per-unit premium on Krugerrand goes down as compared to gold bars. On the contrary, a larger bar of gold, that is, one Kilo or more, is cheaper as compared to similar quantity of Krugerrand. This is since it is much harder to dispose of a one-kilo bar of gold and thus its demand is generally lower.
Krugerrands – Krugerrands are the commonest of one-ounce bullion coins. The biggest advantages of krugerrands are that they are consistently of high quality and quantity standard, available in huge quantities and due to their basic aesthetic design are the cheapest. Therefore, Krugerrands are the best investment option especially for small scale traders. Due to their standardization, it becomes so easy for an investor to compare their prices in the market and thus get the cheapest option and in effect manage the capital gains and accompanying taxes efficiently.
Gold Sovereigns – Due to the aesthetic, historical and sentimental value of gold sovereigns, they are relatively more expensive than krugerrands. However, these are basically extrinsic properties which irrationally increase the price value and thus capital gains leading to higher tax liability.
Buy gold at the lowest price possible – The lower the price of gold the lower the amount of tax liability. At the Moment Hartfort Gold Group is the only company offering a price match (meet or beat any competitor’s price) which is one of the reasons that this company is recommended by Bill O'Reilly.
Make comparisons based on percentages as opposed to actual price – prices fluctuate and vary just as are different quantities and qualities of gold. Use quantity/price or quality/price percentages otherwise known as percentage premium to compare various investment options.
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