What this line means
The portion of your long-term capital gain that comes from the sale of collectibles or from certain gains on qualified small business stock. Collectibles include art, antiques, gems, stamps, coins, gold, silver, and other precious metals. These gains are taxed at a maximum rate of 28% instead of the standard long-term capital gains rates of 0%, 15%, or 20%.
Does this apply to you?
- You sold gold, silver, platinum, or other precious metals held more than one year
- You sold art, antiques, stamps, coins, or other collectibles at a gain
- You sold fine wine, rugs, or other tangible personal property classified as collectibles
- You had a gain on qualified small business stock that was only partially excluded under Section 1202
Easy to overlook
Gold and silver ETFs are taxed as collectibles ETFs that hold physical gold or silver (like GLD or SLV) are taxed at the 28% collectibles rate, not the standard 15%/20% long-term capital gains rate. This catches investors who treat precious metals ETFs the same as stock ETFs for tax purposes. ETFs that hold futures contracts on metals (not physical metal) may receive different treatment. 1 General filing pattern — collectibles taxed at higher rate
The 28% rate is a maximum, not a flat rate If your ordinary income tax bracket is below 28%, you pay your ordinary rate on collectibles gains instead. The 28% rate only applies when your income would otherwise push the gain into the 32% bracket or above. Below that, you pay your ordinary rate. Lower-income filers pay less than 28% on collectibles gains. 2 IRS Schedule D instructions — 28% Rate Gain Worksheet
Watch out for this
Reporting the sale of a gold ETF or physical gold as a standard long-term capital gain and paying 15% tax on it. The IRS classifies gains from collectibles and collectibles-backed investments at the 28% rate. Underreporting the tax rate on these sales results in an underpayment that can generate interest and penalties.
Footnotes
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IRS Publication 550, Investment Income and Expenses, Collectibles. https://www.irs.gov/pub/irs-pdf/p550.pdf ↩
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IRS Schedule D (Form 1040) Instructions, 28% Rate Gain Worksheet. https://www.irs.gov/instructions/i1040sd ↩