Many people want to invest in gold because it's a tangible investment, with intrinsic worth. While currencies can lose value, gold tends to hold its value. However, if you want to minimize your tax burden and invest in gold at the same time, you may want to consider an Independent Retirement Account (IRA) with gold. Here's what you need to know.
IRA Contributions Are Tax Deductible
As of tax year 2019, you can contribute up to $6,000 per year to an IRA, and as long as you put the funds into a traditional IRA, the contributions are tax deductible. To explain, imagine your taxable income after subtracting other deductions is $40,000, and then, you contribute $6,000 to an IRA. That drops your taxable income to $34,000.
In other words, you don't pay any income tax on the $6,000. Note that this doesn't apply to contributions to ROTH IRAs, and if your employer offers a 401(k) retirement plan, your tax deduction may be reduced.
There Is No Tax Deduction for Buying Gold
Although the Internal Revenue Service offers tax deductions for contributing to IRAs and some other retirement accounts, you don't receive a tax deduction for investing in gold. If you simply buy $6,000 worth of gold bars and put them in a safety deposit box, you can't claim any special tax deductions. However, if you buy gold inside a traditional IRA, you can claim the IRA deduction explained above.
You Don't Face Tax on Capital Gains in Your IRA
Often, when you sell an asset for a profit, you have to report the profit as a capital gain to the IRS. Then, you have to pay capital gains tax on that amount. For instance, if you buy gold for $6,000 and sell the gold in a few years for $10,000, you may have to report a $4,000 capital gain.
There are a few exceptions to this rule. In particular, you don't have to report capital gains from the sale of your home up to a certain amount. In addition, when you earn capital gains in an IRA, you don't have to pay any tax. If the $6,000 of gold in your IRA became worth $10,000 and you traded it for another asset, you wouldn't face any capital gains tax. With an IRA, you only pay tax when you withdraw the funds at retirement, and at that point, you just face income tax on your withdrawals.
To learn more about the tax advantages and general benefits of putting gold into your IRA, contact an IRA custodian, like McAlvany ICA.
Share28 February 2019
Adoption is a beautiful thing. Raising a child someone else had is a completely unselfish act of love. Do you want to adopt a newborn in the near future but are afraid you won’t have the necessary funds to do so? Consider meeting with an experienced financial adviser. This professional can sit down with you and recommend viable fundraising options. For instance, you might want to take out a loan. Or you may wish to sign up for a grant. Obtaining a tax credit is also an alternative. On this blog, I hope you will discover effective tips to help you raise money for an upcoming adoption.