Pawning gold jewelry can bring in some extra cash when you really need it, but you might have to give a cut of the proceeds to Uncle Sam. The Internal Revenue Service taxes capital gains, which are profits you make when you sell property. If you sell gold jewelry at a price that is higher than the amount you originally paid for it, you may owe tax on the difference.
Capital gains are divided into two categories depending on how long you hold property before selling it: short-term and long-term gains. Any profit you make from selling property you hold a year or less is a short-term gain. Short-term gains are taxed at the same rate that applies to your ordinary income, which ranges from zero to 39.6 percent depending on your annual income.
When you hold onto something longer than a year before you sell it, any profit you make from its sale is a long-term gain. Most assets, like stocks and bonds, are subject to a maximum long-term gains rate of 20 percent. According to the IRS, collectible items like gold and gems face a special long-term capital gains rate of 28 percent. If your normal income tax rate is lower than 28 percent, your ordinary income tax rate applies instead of the 28 percent rate.
The government lets you deduct up to $3,000 in capital losses in a year for those who are married filing jointly or $1,500 if you are single or married filing separately. The deduction for investment losses does not, however, apply to property held for personal use. Jewelry is generally considered personal use property, since the main reason people buy jewelry is to wear it rather than to hold onto it as an investment.
Net Investment Income Tax
Starting in 2013, the IRS may take an additional cut of your capital gains due to a new net investment income tax. The NIIT tacks an extra 3.8 percent tax onto your capital gains if you make more than $200,000 as a single taxpayer or $250,000 as a married person filing a joint tax return. Other types of investment income like interest and dividends are also subject to the NIIT.
- Internal Revenue Service: Topic 409 - Capital Gains and Losses
- Internal Revenue Service: Ten Important Facts About Capital Gains and Losses
- Internal Revenue Service: Sales and Trades of Investment Property
- The Wall Street Journal: The New Capital-Gains Maze
- Internal Revenue Service: Net Investment Income Tax FAQs
- Internal Revenue Service. "Topic No. 409 Capital Gains and Losses." Accessed Nov. 4, 2020.
- Internal Revenue Service. "2019 Publication 550." Accessed Nov. 4, 2020.
- Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020." Accessed Nov. 4, 2020.
- Internal Revenue Service. "2019 Publication 523." Accessed Nov. 4, 2020.
- Internal Revenue Service. "Questions and Answers on the Net Investment Income Tax." Accessed Nov. 4, 2020.
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.