Gold does not depreciate. It does not wear out physically, and the IRS does not let you depreciate it on a tax return. Under federal tax law, depreciation deductions exist for property that suffers exhaustion, wear and tear, or obsolescence, and gold meets none of those tests. Its dollar price moves, sometimes sharply, but a price swing is not depreciation. That single distinction shapes how gold is classified, how your cost basis behaves, and what you owe when you eventually sell.
Gold Does Not Physically Deteriorate
Gold is chemically inert. It does not react with oxygen or moisture, so it does not rust like iron or tarnish like silver. A one-ounce bar produced today will contain the same amount of pure metal a century from now. It does not corrode, become brittle, or lose mass through chemical breakdown.
That permanence is the physical foundation for the tax treatment. A coin minted thousands of years ago still holds its original gold content. Because the metal itself never declines, there is no useful life to measure and nothing to write down year by year.
Why the IRS Will Not Let You Depreciate Gold
Depreciation under IRC Section 167 is available for property used in a trade or business or held to produce income, and only when that property experiences exhaustion, wear and tear, or obsolescence.1Office of the Law Revision Counsel. 26 USC 167 – Depreciation Machinery, vehicles, and buildings qualify because they gradually lose usefulness. Gold does not. There is no point at which it becomes used up or outdated, so the IRS assigns it no useful life and permits no annual depreciation deduction.
Instead, gold sits in the capital asset column under IRC Section 1221, which sweeps in property that is not inventory, not depreciable business property, and not otherwise excluded.2Office of the Law Revision Counsel. 26 USC 1221 – Capital Asset Defined The practical consequence for owners is straightforward: your cost basis—what you paid, including dealer premiums and commissions—stays fixed for as long as you hold the metal. No annual deductions chip away at it the way they would with a rental building or a piece of equipment.
This cuts both ways. You get no yearly write-off while you hold gold, but you also do not have to recapture depreciation when you sell. The gain or loss is simply the sale price minus the basis you started with.
How Gold Is Actually Taxed When You Sell
Because gold is a capital asset, tax happens at sale, not during ownership. The IRS classifies gold as a “collectible,” which changes the rate structure compared to ordinary stocks or bonds.
- Held one year or less: gains are taxed as ordinary income at your regular bracket, the same as wages.3Internal Revenue Service. Topic No. 409, Capital Gains and Losses
- Held longer than one year: gains are taxed at a maximum rate of 28 percent, higher than the 15 or 20 percent that applies to most long-term stock gains.3Internal Revenue Service. Topic No. 409, Capital Gains and Losses
The 28 percent figure comes from IRC Section 1(h), which defines “collectibles gain” by reference to the collectibles definition in IRC Section 408(m).4Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed It is a cap, not a flat rate. If your ordinary rate is lower, you pay the lower rate.
The form of your gold investment matters here. Physically backed gold ETFs, which hold actual bullion on your behalf, are generally taxed at the same 28 percent collectibles rate as coins and bars. Gold mining stocks and mining-focused ETFs are taxed like regular equities at the standard long-term rates of 0, 15, or 20 percent.
An additional 3.8 percent Net Investment Income Tax may apply on top of the collectibles rate. It kicks in when your modified adjusted gross income exceeds:5Internal Revenue Service. Topic No. 559, Net Investment Income Tax
- $200,000 for single filers or head of household
- $250,000 for married filing jointly
- $125,000 for married filing separately
- $16,000 in 2026 for estates and trusts6Internal Revenue Service. 2026 Form 1041-ES
The surtax applies to the lesser of your net investment income or the amount by which your income tops the threshold. Stacked on the 28 percent collectibles rate, a high-income seller could face an effective federal rate of 31.8 percent on long-term gold gains.
Cost Basis for Inherited and Gifted Gold
Because basis is fixed rather than depreciated, how you acquired the gold in the first place matters a lot when you sell.
- Purchased gold: basis is what you paid, including dealer premiums and commissions. It stays put.
- Inherited gold: under IRC Section 1014, your basis “steps up” to the fair market value on the date of the decedent’s death. If a parent bought gold at $400 an ounce and it was worth $5,000 when they died, your basis is $5,000. Decades of unrealized gain can vanish in a single transfer.7Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
- Gifted gold: under IRC Section 1015, you generally take the donor’s original basis (carryover basis). If the donor paid $800 an ounce, your basis is $800 no matter what the metal is worth when you receive it. One exception: if the fair market value at the time of the gift was lower than the donor’s basis, you use the lower value when calculating a loss.8Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust
The stepped-up basis rule is why long-term holders often think about gold in estate-planning terms. A position that has appreciated over decades may pass to heirs with little or no built-in capital gains liability.
Price Swings Are Not Depreciation
Gold’s dollar price moves a lot. It traded near $5,150 per ounce in early 2026 after hovering around $2,950 a year earlier, and it rose roughly 74 percent between early 2025 and early 2026. Central bank purchases, interest rate decisions, inflation, currency movements, and geopolitical stress all push the price up and down. Rate hikes tend to weigh on gold because interest-bearing alternatives become more attractive. Rate cuts and inflation tend to lift it.
None of that is depreciation. Depreciation is a scheduled tax write-down against income during ownership; a price change is unrealized fluctuation in market value. If gold’s price drops after you buy, you have a paper loss you cannot deduct. If it rises, you have a paper gain you do not report. Nothing hits your return until you sell.
Carrying Costs Reduce Returns but Are Not Deductible Depreciation
Gold pays no dividend and earns no interest. It also comes with ongoing expenses:
- Storage in a professional vault, charged as a percentage of value or a flat annual fee.
- Insurance against theft, loss, or damage, whether stored at home or in a depository.
- Dealer premiums above spot when you buy and discounts below spot when you sell.
- Sales tax in some states on precious metal purchases, though many states exempt investment-grade bullion, and rules vary widely. Where sales tax applies, it adds to your cost basis.
These are real drags on returns, and they are easy to confuse with depreciation. They are not. You cannot deduct them as annual depreciation allowances against income. They simply reduce the profit you eventually realize when you sell, which is one more reason gold’s tax picture centers entirely on the sale transaction rather than on anything that happens while you hold it.