Tax on Selling Scrap Gold: What Counts as Gain

When old jewelry, broken chains, and dental gold are sold by weight, the transaction is usually a sale of personal property, not the sale of an investment. The tax treatment follows the same federal rules that apply to gold bullion, but the practical experience differs in two ways: the gain is almost always calculated without a purchase receipt, and a loss on the sale is not deductible at all. This page explains the rule, what happens when the original cost is unknown, and where the reporting thresholds sit.

How the Gain Is Taxed

Scrap gold is treated as a collectible for federal income tax purposes. That classification applies to any gold that is not part of an investment contract or a regulated futures contract, and it includes jewelry, coins, and bullion. When scrap gold is sold for more than its basis, the gain is a capital gain, and if the gold was held for more than one year, the gain is a long-term capital gain subject to the collectibles maximum rate.

For the 2026 tax year, the collectibles maximum rate is 28%. That rate is set by statute and has changed in the past; Congress can adjust it in any tax bill. The 28% maximum applies to the taxable gain, not to the full sale price. If the gold was held for one year or less, the gain is a short-term capital gain, taxed at the same rates that apply to ordinary income, which for 2026 range from 10% to 37% depending on filing status and taxable income.

A gain is the difference between what the seller receives and the seller’s basis in the gold. Basis is generally what the seller paid for the item, plus any costs of acquisition, such as shipping or appraisal fees. For scrap gold, the basis is often the original purchase price of the jewelry or coin, not the scrap value. If the item was a gift, the basis is usually the donor’s basis, with adjustments for gift tax paid. If the item was inherited, the basis is generally the fair market value on the date of death.

When There Is No Basis

Most people selling scrap gold do not have a receipt from the original purchase. The gold may have been bought decades ago, received as a gift, or inherited. When the basis cannot be determined, the tax law does not presume a zero basis. The IRS requires a reasonable estimate based on the facts available. That estimate can be the fair market value of the gold at the time it was acquired, or the original purchase price if that can be reconstructed from memory, old insurance records, or family documents.

If no basis can be established, the entire sale price could be treated as gain. That is the default position the IRS takes when a taxpayer cannot substantiate cost. The burden is on the seller to show what the basis was. A reasonable estimate, documented in writing, is better than no estimate at all. The receipt, an old appraisal, or a jeweler’s note from the original purchase is what establishes basis years later.

Losses on Scrap Gold Are Not Deductible

A key difference between scrap gold and bullion held as an investment is the treatment of losses. If scrap gold is personal-use property, as it is when the gold was worn as jewelry or held for personal enjoyment, a loss on its sale is not deductible. The tax code allows capital losses only on property held for investment or business use. Personal-use property, including jewelry, is explicitly excluded from loss deductions. That means if the sale price is less than the basis, the loss cannot offset other gains or income.

If the gold was held as an investment, such as bullion bars or coins bought specifically for resale, a loss would be deductible as a capital loss. But the characterization depends on the facts. The same gold coin could be an investment in one person’s hands and a personal item in another’s. The IRS looks at how the property was used and the intent at the time of purchase.

Reporting the Sale

A sale of scrap gold is reported on Form 8949 and Schedule D of Form 1040. The sale must be reported if the total gain is taxable, regardless of the amount. There is no minimum threshold for reporting a capital gain on a collectible. Even a small gain from a $200 sale must be reported.

However, a payer may be required to report the transaction to the IRS on Form 1099-B if the sale is made through a broker or if the payment is made in cash and the amount exceeds $10,000. The $10,000 cash reporting threshold is set by the Bank Secrecy Act and applies to any trade or business receiving more than $10,000 in cash in a single transaction or related transactions. That threshold is not a tax threshold; it is a reporting trigger for the payer. The seller does not have to file a form solely because the amount exceeds $10,000, but the seller must report the gain on Schedule D.

State Sales Tax

Sales tax on scrap gold is set by each state, and the exemptions change by legislative session. Some states exempt gold bullion and coins from sales tax, but the exemption often depends on the purity, the form, or the purchase price. Scrap gold sold to a dealer may be subject to sales tax on the full sale price in some states, while others exempt it as a wholesale transaction. The seller should check the rules in the state where the sale occurs, because the tax treatment can vary significantly. No single state rule applies generally.

What People Get Wrong

A common assumption is that selling scrap gold is a tax-free transaction because the gold was a personal item. That is not correct. The IRS treats any gain on the sale of personal property as taxable income, even if the property was not held for investment. The fact that the gold was worn or stored in a drawer does not exempt the gain.

Another natural mistake is to assume that the basis is zero if the original receipt is lost. That is also not correct. The law allows a reasonable estimate of basis, and the taxpayer has the burden to prove it. A zero basis is the last resort, not the starting point.

A third misunderstanding is that a loss on scrap gold can offset other gains. Because scrap gold is usually personal-use property, the loss is not deductible. This is a surprise to many sellers who expect the same treatment as stocks or bonds.

Comparison: Scrap Gold vs. Investment Gold

The table below compares the tax treatment of scrap gold sold as personal property with gold held as an investment.

Practical Points

• Keep any documentation of the original purchase, even a rough estimate, to support the basis.
• If the gold was inherited, the basis is the fair market value on the date of death, which can be determined from estate records or appraisals.
• If the gold was a gift, the basis is generally the donor’s basis, which may be higher or lower than the fair market value at the time of the gift.
• The sale of scrap gold is reported on Schedule D, and the gain is subject to the collectibles maximum rate if held over a year.
• State sales tax rules vary; check the current law in the state where the sale occurs.

This page explains the federal rules as they apply to the 2026 tax year. Tax rates and thresholds are set by statute and can change. For a specific situation, consult a CPA or tax professional who can apply the rules to the facts of the case.