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Latest on Gold and Other Alternative Investments

Latest on Gold and Other Alternative Investments

As your net worth grows, many financial advisors will tell you it’s time to diversify your portfolio with alternative investments. These assets can include gold, real estate, and even startups. Before jumping in, though, talk to your tax advisor. The amount you invest and how you invest it can affect your tax bill. Here are some considerations when it comes to popular alternative investments:

  • Gold: This precious metal is a common alternative investment. Physical gold investments are classified by the IRS and taxed as collectibles (as are silver, platinum, and palladium). This guide from the Journal of Accountancy outlines the differences between physical and non-physical gold investments as well as opportunities like purchasing gold within an IRA (do note, though, that the article was written before the tax code changes).
  • Real estate: Real estate investment trusts (REITs) are another common alternative investment vehicle and their value seems to have skyrocketed after the latest tax code changes. That’s because REITs qualify for the new 20-percent deduction on pass-through income, which can lead to huge savings for high net-worth investors in particular.
  • Cryptocurrency: The trading of Bitcoin and other cryptocurrencies has been in constant flux this year. But one thing’s for sure: The IRS is looking for its share of your profits. Before 2018, cryptocurrency exchanges could happen tax-free, but cryptocurrencies are now viewed as property, which means transactions can be subject to capital gains or losses
  • Startups: In 2016, a crowdfunding regulation passed by the Securities and Exchange Commission made it possible for nearly anyone to invest in pre-IPO startups and local businesses, even with limited funds. Although numerous websites make crowdfund investing look easy, the decision shouldn’t be taken lightly. The IRS has yet to truly address the new practice and how it affects taxable income, which means careful tax planning is necessary to avoid surprises.

Alternative investments can be filled with both opportunity and pitfalls. Feel free to contact us for specific questions about how certain alternative investments may affect your taxable income.

Image Copyright: olegdudko / 123RF Stock Photo

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