The largest gold ETF, SPDR Gold Shares (NYSEArca: GLD), is an example. If an investor made a long-term gain of $10,000 on a basic stock ETF and have no offsetting losses, you would pay $1,500 in federal taxes. The same gain in a gold bullion ETF would be $2,800, Reuters points out. [ETF Tips as the Tax Deadline Looms]
Here are a few of the realities of commodity ETF investing and taxes:
- These ETFs also may need to sell some of their holdings to pay operating expenses. If that happens, even though shareholders receive no distributions, they will still be taxed on any gains realized when that bullion got sold, and it will also be taxed at that special collectibles rate.
- As with any other taxable gain, you will need to determine your cost basis – the starting price in the investment for tax purposes – on each of those sales. For these funds, you will receive 1099 forms that report your sales for tax purposes.
- This year there is an added paperwork headache for the preparer–the new Form 8949, used to report capital gains and losses on your tax return to account for the new cost-basis rules, has no 28 % column. You will still need to report those gains, figuring them on the 28 % worksheet. All capital gains and losses information ultimately goes on Schedule D.
It is important to consult a professional tax preparer to discuss the realities of how physical ETFs can impact a specific tax situation.
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.