It is not a pleasant experience to sell your gold coin investments and receive less money than you paid. The tax rules consider your gold coins to be investment assets, so the losses you incur can be noted on your taxes. Getting a tax deduction may take some of the sting out of the financial loss.
Gold coins are classified as capital assets. Gains on capital assets are classified as capital gains and reported as such on your income tax return. You can use losses on capital assets held for investments to reduce the amount of reported capital gains or as deductions against other income. If you have sold your gold coins for less than you paid for them, you have a deductible capital loss.
A capital loss must be classified as either a short term or long term loss. If you owned your gold coins for one year or less, the loss will be classified as a short term loss. If the holding period was greater than a year, the loss with be a long term capital loss. When claiming the losses on your tax return, the losses must first be used against the same type of gains, then the other type of capital gain and finally against other income. Use of losses from you gold coins must be applied in the proper order until all of the losses are accounted for.
Reporting Your Loss
Capital gains and losses are reported on the Schedule D form included with your income tax return. The form separates out short and long term losses and gains, automatically using the losses in the correct order to offset gains and reduce your capital gains taxes. Once completed, the Schedule D will produce either a balance of capital gains after the losses from your coin sales have been deducted or a net capital loss which transfers to your 1040 income tax return.
Loss Write Off Limits
If you have capital losses in excess of your capital gains for the year, the maximum amount of loss you can use against other income is $3,000. For example, if you lost $10,000 on your sale of gold coins and had no other capital gains or losses, you could use $3,000 of the loss as a write-off on this year's tax returns. The remaining unused loss would be carried forward to next year when the loss can be used against capital gains or other income.
- IRS.gov: Publication 17, Sale of Property
- IRS.gov: Ten Important Facts About Capital Gains and Losses
- U.S. Rare Coin Investments: How is the gain or loss upon sale treated for tax purposes?
- Internal Revenue Service. "Topic No. 409: Capital Gains and Losses." Accessed Dec. 1, 2019.
- Internal Revenue Service. "Publication 544: Sales and Other Dispositions of Assets." Accessed Dec. 1, 2019.
- Internal Revenue Service. "About Form 8949, Sales and other Dispositions of Capital Assets." Accessed Dec. 9, 2019.
- Internal Revenue Service. "Publication 550: Investment Income and Expenses," Page 57. Accessed Dec. 1, 2019.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.