How Are Collectibles Taxed?

Capital gains on taxes from selling a collectible item can reach as high as 28 percent. The government sets the tax price of buying and selling collectibles high as the items are worth a significant amount of money.

What Are Collectible Items?

Collectible items are rare objects which have a unique appeal to a buyer. Some examples of collectible items are coins, stamps, rugs, books, artwork, trading cards, gems, and other antiques. These objects usually tend to be special one of a kind items or items which are part of a bigger set.

How Are Collectibles Taxed by The Government?

The tax code released by the Internal Revenue Service (IRS) has a special procedure for collectible items. The tax rates on normal item capital gains of 0, 15, and 20 percent do not apply. Taxes owed are at your normal bracket rate with a cap of 28 percent. Short-term capital gains on the sale of a collectible item are taxed at an ordinary rate.

Personal Use

Beware of the tax language which still works against you even if you purchase the collectible item for personal use. Selling collectibles the investor once owned for personal use can’t be claimed at a capital loss and selling those items for a profit will result in a taxable capital gain.

Conclusion

Being aware of how collectibles are taxed is an important part of ensuring that you’re making the right investment. Think of all of the possible ways you can avoid any capital gains taxes when investing in special collectible pieces.

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