A Taxing Situation for Gold

If you're considering investing in gold but worried about being stuck with a bloated tax bill, there's a bit of good news: Congress is on the case. Although gold may bring a measure of stability to a portfolio, it can be a real downer during tax season, when Uncle Sam helps himself to as much as a heaping 28 percent cut of your realized gains—nearly double the 15 percent capital-gains rate that typically applies to stocks or mutual funds. That's because the IRS treats gold as a collectible—like, say, a Picasso or a stamp collection—rather than as a traditional equity investment.

But all that could change. In June, members of Congress unveiled legislation designed to establish parity between the tax treatment of precious metals and that of equities. The Fair Treatment for Precious Metals Investors Act, which was introduced as identical bills in the House and the Senate, would take gold, silver, platinum, and palladium investment products out of the tax bucket for collectibles and make them eligible for the lower 15 percent rate that applies to capital gains on assets held a year or longer.

Rep. Shelley Berkley, the Nevada Democrat who sponsored the House bill, argues that investing in precious metals is not at all like acquiring an expensive painting. "Most people trade in precious metals as an investment and a hedge against a future downturn in the economy," Berkley says. "To me, it's more in keeping with a stock purchase."

Don't start spending those tax savings quite yet. Similar legislative efforts have been underway since 2000, but proponents have thus far failed to rewrite the law. Berkley would not hazard a guess about when the bill might pass, saying that she wants to amass 50 cosponsors before pressing the congressional leadership to address the issue—she has only nine cosponsors so far. And lawmakers still don't know how they would offset the estimated $52 million in lost revenue that the bill would cost the government over 10 years, presenting a significant obstacle to the bill's passage.

Michael DiRienzo, a lobbyist at the Klein & Saks Group, which is rallying support for the bill, says that even though the legislation has no active opposition, the process of changing a federal tax law is a long and arduous one. Still, "much headway has been made," DiRienzo says. "And we are optimistic that Congress will pass this legislation."