Lately, theres been a lot of interest in gold as an investment. From physical gold, to gold ETFs, a number of people have been looking at the recent run-up in gold prices and wondering if its time to get in. While some believe that gold is in a bubble right now, and that the bubble will burst, others think that we are just at the beginning of an even bigger run-up in gold prices.

If you are considering investing in gold, though, its important to understand the tax implications. You may see gold as an investment, but the IRS sees it as a collectible, and that means you need to be aware of the capital gains taxes associated with that status.

Forms of Gold Taxed at the Collectible Rate

Do you know how gold investments are taxed?

Note that the capital gains rate for collectibles is 28%. When you buy gold . if you sell it for a gain, this is the rate you will be taxed on your gains. Here are the types of gold investment considered collectibles for tax reporting purposes:

• Physical gold, including wafers, bars, rare coins, bullion coins (all denominations), commemorative coins, and rounds.
• Certificate gold. When you buy gold ownership and have it kept for you, as in the service offered by EverBank, you are issued a certificate. This so-called paper gold is also considered a collectible.
• Electronic gold, such as what you would purchase via Bullion Vault or GoldMoney.
• Gold ETFs .

So, even if you invest in a gold ETF, you are still going to pay the collectible capital gains rate. The main exception is when you invest in gold stocks. Like all other stocks, gold stocks are taxed at regular capital gains rates. Also, note that the rules that apply to gold as a collectible also apply to investment in other precious metals . such as silver, palladium and platinum.

Reporting Your Gold Gains

As always, in our tax system, you are required to report your own capital gains from the sale of gold. Even though some dealers dont have to report what they bought to the IRS (although the IRS can come and audit the records), you are supposed to report your gains from the sale. When you profit, you are required to let the government know, and pay the 28% tax rate on your increase.

It is worth noting that the sale of gold jewelry is not reportable. One of the ways that some gold investors diversify their gold holdings and improve their tax efficiency, is to build heirloom collections of jewelry. This way, its possible to build up a stash of portable physical gold, and sell it without worrying too much about the tax consequences (although you might have to worry about being vulnerable to theft).

Bottom Line

If you are interested in gold, make sure you understand the tax implications involved. Remember that gold offers no income. so you are entirely dependent on what happens to the market later on. Also, realize that in buying gold you might pay a premium, so that can make it more difficult to profit if you sell later. And, as always, before making any investment decision, be sure to do your own research and consult with a knowledgeable investment professional and/or tax advisor, since I am neither, and and this article shouldnt be construed as advice.