Summary:
Precious metals can add stability and diversification to a portfolio, but they also come with unique tax rules, transaction costs, and estate planning considerations. This article explains how sales of gold and other metals are taxed, highlights hidden costs like dealer markups and storage fees, and explores what happens when metals are inherited. Understanding these factors can help investors make more informed, tax-efficient decisions about holding physical precious metals.

In 2025, prices for gold and silver surged, reaching all time highs and marking gains for 60-70% for the year. Such a surge in prices has attracted many first time investors. For many investors, precious metals like gold, silver, and platinum represent stability in uncertain times. They’re tangible, easily recognized, and have held value across centuries. Whether viewed as a hedge against inflation or a diversification tool, owning physical metals can feel reassuring compared to holding other paper assets, like cash.

However, as with any investment, it’s important to look beyond the allure of gold bars and silver coins. Precious metals come with unique tax considerations, transaction costs, and estate planning implications that can significantly affect their long-term value. Understanding these details can help ensure that your investment decisions align with your broader financial goals.

The Basics of Holding Precious Metals

Investors typically hold precious metals in one of two ways: physically or through financial instruments such as exchange-traded funds (ETFs) or mutual funds that track metal prices.

Physical ownership includes coins, bullion, or bars stored in safes or depositories. It offers direct control but comes with responsibilities — safekeeping, insurance, and liquidity considerations.

Paper ownership, on the other hand, allows investors to gain exposure to metal prices through securities, without taking possession of the metal itself.

Physical ownership appeals to those who value tangible assets, but it’s important to plan for both the ongoing costs and the tax consequences when it’s time to sell.

Tax Implications When Selling Precious Metals

Precious Metals are Treated as “Collectibles”

The IRS classifies most physical precious metals — gold, silver, platinum, and palladium — as collectibles. This means that long-term capital gains on their sale (after holding them for more than one year) are taxed at a maximum rate of 28%, which is higher than the standard long-term capital gains rate of 15% or 20% that applies to most investments like stocks or mutual funds.

If metals are sold within one year of purchase, gains are taxed at ordinary income rates, which can be even higher depending on your tax bracket.

Reporting and Record-keeping Requirements

Sales of precious metals must be reported on Form 8949 and Schedule D of your federal tax return. Certain types and quantities of metal sales may also trigger a Form 1099-B from the dealer, which reports the transaction to the IRS.

Because many purchases are made in cash or through private dealers, accurate record-keeping is essential. If you decide to purchase physical precious metals, keep purchase receipts, dealer invoices, and documentation of sale prices to establish your cost basis. Without these records, the IRS may assume your entire sale proceeds are taxable gain.

A Practical Example

Consider the following simplified case study:

In 2015, an investor purchased 10 ounces of gold bullion for a total of $12,000 ($1,200 per ounce). In 2025, they sell the same gold for $23,000 ($2,300 per ounce).

The gain is $11,000. Since the investment was held for more than one year, it qualifies as a long-term capital gain under the IRS’s collectibles rules.

At the 28% collectibles rate, the investor owes $3,080 in federal tax (state taxes may apply as well).

Even though the investment appreciated nicely, nearly one-third of the gain goes to taxes — underscoring how important it is to plan for tax-efficient timing and strategies before selling physical metals.

State Taxes Vary

There is no single national rule for taxing precious metals at the state level. Each state decides whether long term capital gains or sales tax applies. Many states have exemptions based on the amount of the transaction, the type of metal, purity requirements, and legal tender status. Certain states do not charge sales tax on gold, silver, or bullion when purchased for investment purposes. This generally applies to bullion and coins as long as they meet purity requirements.

If you are making a larger purchase, it may be worth your time and effort to purchase in a state that does not apply sales tax.

Remember, state tax rules vary, and each state decides how to apply taxes to the purchase and redemption of precious metals. Even if a state does not apply sales tax, state capital gains tax may still apply. Before making a purchase, confirm the state's tax rules for purchasing and selling precious metals. Coordinate large purchases with tax and financial planning. Be sure to keep detailed records, including purchase price, purchase date, sales tax paid, and the storage location.

Hidden and Transactional Costs

Taxes aren’t the only expense to consider. The total cost of owning and selling physical metals can be higher than many investors anticipate.

Dealer and Exchange Fees

Dealers typically charge markups over the spot price when you buy and apply discounts when you sell — a bid-ask spread that can range anywhere from 2% to 10% or more, depending on the product and market conditions.

Pawn Shops and Alternative Buyers

Pawn shops and other cash-for-gold businesses may seem convenient but often pay well below market value — sometimes 60% to 80% of the current spot price. Additionally, these transactions can lack transparency, security, and proper documentation, which complicates tax reporting.

Storage and Insurance

If you store metals in a safe deposit box or private depository, consider the annual storage and insurance fees. These costs, while seemingly modest, can compound over time and reduce your effective return.

Precious Metals in Estate Planning

Precious metals also raise unique issues in estate and inheritance planning. Because they are tangible assets, they can be more difficult to account for and transfer than securities held in custodial accounts.

Physical Transfer and the Step-Up in Basis

When precious metals are inherited, they typically receive a step-up in cost basis — meaning the heir’s cost basis becomes the fair market value at the time of inheritance. This can significantly reduce taxable gains if the metals are later sold.

For estate tax purposes, it’s important to have metals properly appraised to ensure accurate valuation.

Logistical and Legal Considerations

Heirs need to know the metals exist, where they are stored, and how to access them. Listing precious metals correctly in your will or trust helps avoid confusion or disputes among beneficiaries. Storing them securely and maintaining documentation simplifies administration and protects against loss.

A Real-Life Example: When Precious Metals Aren’t Properly Documented

A father remarried later in life, after age 65. Over decades—long before his second marriage—he had built a sizable collection of gold and silver coins. In his estate plan, he intended for the collection to be divided equally: 33% to each of his two his children, and 33% to his spouse.

However, his will referenced the asset only generally as “my collection of gold and silver coins.” There was no inventory, no description of specific coins, no estimated value, and no current record of where the collection was stored.

After his death, the executor attempted to distribute the estate. The coins could not be located. There were no up-to-date records documenting what coins existed, when they were acquired, or their approximate value. The safe where the coins had historically been kept was empty.

The surviving spouse was the only other person who had access to the safe. While it was suspected that she may have taken possession of the coins, there was no documentation, inventory, or third-party verification to confirm that the collection still existed at the time of death—or what it consisted of. Without evidence, there was no practical or legal way to prove that any coins remained in the estate.

As a result, the intended division of this asset never occurred. The children received nothing from the collection their father had spent a lifetime building, and the executor had no ability to enforce the instructions in the will. The father’s intentions could not be carried out—not because they were unclear, but because they were undocumented.

Planning Takeaways

General language is not enough. Listing “gold and silver coins” in a will without detail makes enforcement nearly impossible.

Create and maintain an inventory. Include descriptions, quantities, approximate values, and identifying features where possible.

Document storage and access. Clearly note where precious metals are kept and who has access.

Update records regularly. Precious metal holdings often change over time; outdated records are no better than none.

Blended families require extra care. Second marriages increase the importance of documentation and transparency.

Coordinate your estate plan. Wills and trusts should be supported by physical records and clear instructions for executors.

Precious metals can be an effective part of a wealth strategy—but without proper documentation, they can easily fall outside the estate plan you worked hard to create.

Trusts and Custodial Accounts

In some cases, holding metals within a trust can streamline inheritance and ensure the assets are distributed according to your wishes. This can also add a layer of legal protection and privacy. Again, proper documentation and even third-party valuation remain critically important for your estate plan.

Strategic Considerations for Investors

Precious metals can play a useful role in a diversified portfolio — but it’s essential to consider their after-tax and after-cost returns relative to other inflation-hedging assets, such as Treasury Inflation-Protected Securities (TIPS), real estate, or commodities funds.

A thoughtful strategy may involve:

Limiting physical metals to a modest portion of your overall assets.

Balancing tangible assets with more liquid, income-producing investments.

Periodically reviewing storage, insurance, and tax implications with your advisor.

Here at Clear Insight, we help clients evaluate how precious metals fit within their long-term investment and estate planning objectives, ensuring decisions are made in the context of their total financial picture.

Conclusion

Precious metals can be a meaningful part of a well-rounded financial plan — but the details matter. Taxes, dealer spreads, and storage costs all affect your net return, while estate planning considerations ensure your assets are transferred efficiently and securely.

Before buying, selling, or passing down physical metals, it’s important to take time to understand their full financial impact. A fiduciary advisor can help you navigate these complexities and ensure your strategy supports your broader goals — now and for generations to come.

Understanding the Costs and Tax Implications of Holding Precious Metals