What is Your Tax Strategy When You Turn Your Gold To Cash?

[Mike Hillis]

Seeking some wisdom from the pros....

Those of you that hunt gold for a living, when you turn your gold into cash, how do you report the income?

What is the best tax strategy to follow. Is it better to report it as individual income, or is it better to run it through a business?

HH
Mike

[Steve Herschbach]

I wrote an article on the subject in March 2013 for the ICMJ Prospecting & Mining Journal at http://www.icmj.com/article.php?id=2349

 

Gold is not income until sold. Once sold for money, you have income to deal with for tax purposes. You can run as a regular business with profits and losses, or as a hobby, which allows you to offset income with expenses up to the point where you might show a loss. A hobby business is not allowed to show losses, only profits.

My prospecting is a for profit enterprise, one that has made me a surprising amount of money over the years. As such I run it as a business. I have a business license and file a schedule C yearly. Been a going concern under a couple different names for over 30 years now.

The key is to be serious about running things in a businesslike fashion. I have a business checking account and keep my business spending separate from my personal spending.

If you are someone who is actually finding any quantity of gold it is something well worth learning about.

Business or Hobby? http://www.irs.gov/uac/Business-or-Hobby%3F-Answer-Has-Implications-for-Deductions

Hobby Deductions. http://www.irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor%3F

Placer Mining Business http://www.irs.gov/pub/irs-mssp/placer.pdf

Now that I have retired from my regular day job my prospecting business is now my primary source of income so I am being more serious than ever about keeping a good set of books.

When in doubt do consult with a tax expert, which I am not. I used to do my own taxes but things got so complicated the last ten years I just got a good tax guy to keep me out of trouble. Well worth the money, and it is tax deductible!

[klunker]

  G'Mornin Mike

 Mining has become a large part of my business out of necessity. I am an LLC and I keep EVERY THING ABOVE BOARD. I don't like the amount of taxes I pay nor how my tax money is spent but trying to be clever these days will bite you in the bu, er,  ankle. I also use a very up front CPA. there are too many changes year to year that could cost or save you money. I don't recommend incorporating until you gross $100k. Good professional advise is cheap. My unprofessional advise is free.

 I believe Chris Ralph wrote about this subject in the ICMJ.

[chickenminer]

Gold is not income until sold.

 

I just got a good tax guy to keep me out of trouble. Well worth the money, and it is tax deductible!

 

Mike,

  Those points above are the key.

I hired a good CPA/ tax person about 7-8 years ago. My only regret is I didn't do it 30 years ago !

It has been some of the best money I ever spent on mining.

 Well, that and the Hitachi EX300 !

[Mike Hillis]

Thanks. I appreciate the advice.

HH

Mike

[Steve Herschbach]

A nice simplified guide Making Your Hobby Pay For Itself at Bankrate.com