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The Tax Benefits Brought by Rare Coins

Rare coin collecting is an interesting hobby as it happens to be one of the many kinds of coin collecting that exist. The vast majority of rare coins get valued based on the amount of bullion contain i.e. the amount of copper, silver or gold they contain. There are various kinds of coins containing varying amounts of different metals such as zinc and nickel. Rare coin collection is an interesting way of making money, and if you happen to be novice at coin collection then you definitely have to buy a coin collector’s book that adequately explains the value of various coins, whether slightly worn out or in mint condition. People new at coin collection may get taken advantage of by vendors selling their old coins for inexpensive prices. The term rare coin isn’t used to imply that the coin is old, it is also set by the kind of condition the coin is in. According to some experts, coin collection cannot only be an enjoyable and profitable activity, it will also provide its investors tax Benefits. Here are some potential tax benefits investors could get from rare coin collection.

The fact that purchases from local dealers could be exempted from state sales tax is an advantage with immediate impact on the cost of rare coins. For people who live in states with high sales tax rates, this could lead to considerable saving. The exemptions are quite practical since people no longer have to prioritize out-of-state dealers in a bid to avoid local sales tax, since they can work with dealers within their own state. In that regard, rare coins differ from jewellery and watches which people purchase as luxury items since those gets taxed as consumer purchases while rare coins get taxed as investments, hence no sales tax.

Most people that invest in real estate are conversant with section 1031 of the IRS code which allows like-kind exchanges i.e. property owners are allowed to trade appreciated properties without triggering any tax liabilities. Similar to real estate investors, rare coin collectors are allowed to make exchanges subject to section 1031 of the IRS code, but similar to real estate, to achieve any tax deferral they have to comply with the regulations. Investors therefore are not allowed to mix and match rare coins with bullion coins on the exchange.

Depending on whether a coin collector is an investor, dealer or collector, the expenses associated with collecting their coins such as insurance, travel to conventions, security and grading fees, get treated differently. Since collectors are considered as hobbyists by the IRS, they have a limited ability to claim expenses despite being liable for taxes on gains.

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