What is the Capital Gains Tax Rate on Jewelry?

What is the Capital Gains Tax Rate on Jewelry?

Posted by Colton Hoisager on Jan 1, 2023

taxes-914675658

Picture this. 

You own a fine piece of jewelry, a ring. Perhaps this ring has been in your family for a while. Your insurance company valued the ring at $4,000. 

But maybe the jewelry isn’t to your taste. Or you’re tired of paying the insurance rider on something that isn’t really useful to you. 

You take that ring to a local gold and silver store and sell it for $6,000. You walk away, happy with the cash in hand. But you neglected one thing. 

You’ll likely be taxed on the profit from that sale. Welcome to the world of capital gains taxes

Capital Assets, Capital Gains 

Whether you buy a piece of jewelry or inherit it, you’re in possession of what the IRS calls a capital asset. Anything you own and use for personal or investment purposes is a capital asset.  

When you sell that capital asset, you either earn a profit on it, or you don’t. When you earn a profit on the sale – also known as capital gains – you’re required to pay taxes on it. 

How much? It depends on how long you own the asset (in this case, the jewelry). If you own it for less than a year, the gain is taxed at an ordinary income rate. If you own the jewelry for a year or longer, the profits are taxed at the capital gains rate. If you incur a loss on that sale, you owe nothing. 

Jewelry, Capital Gains, and Taxes 

Capital gains on jewelry aren’t taxed any differently than capital gains from the sale of stocks, real estate, or commodities. On the federal level, your capital gains tax is based on your taxable income and marital status. 

The 2022 capital gains tax rate is below: 

Taxable Income (Single Filer) 

Taxable Income (Married Filing Jointly) 

Capital Gains Tax Rate 

$0 to $41,675 

$0 to $83,350 

0% 

$41,676 to $459,750 

$83,351 to $517,200 

15% 

$459,751 and above 

$517,201 and above 

20% 

In addition to the above, some states impose their own capital gains taxes.  

But How Much is it Worth? 

It’s one thing if you bought a piece of jewelry. You know what you paid for it. When you sell it, the difference between what you paid versus what you sold it for will be your capital gain (or loss).  

But what happens if you inherit jewelry and then sell it? This is where it gets a little trickier. 

In this case, you need to know the cost basis, or the jewelry’s original value. One way to determine this is through a jewelry expert’s appraisal. Another is to determine the jewelry’s fair market value (FMV) at the time of the decedent’s death, or when the asset transfer occurs. The FMV is the value of an asset is what the market will pay for a particular asset. 

Be Tax Aware 

While you might be anxious to unload jewelry, be sure you understand the tax consequences of its sale. Some of the profit you earn might have to be paid through state and federal capital gains taxes. If you have any questions on this, ask your tax professional for clarification. 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

Hypothetical examples shown are for illustrative purposes only.

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