Rare coin collecting is an interesting hobby as it happens to be one of the many kinds of coin collecting that exist. The majority of rare coins get valued based on the amount of bullion contained in them i.e. silver, copper or gold. There are numerous coins that contain varying percentages of different metals such as nickel and zinc. 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. New coin collectors are vulnerable to exploitation by vendors that sell their old coins for inexpensive prices. The phrase rare coin isn’t used to describe old coins, since it is also determined by the condition the coin is in. Some experts argue that rare coin collection happens to be not only an enjoyable and potentially profitable venture, collecting rare coins is capable of providing its investors tax Benefits. Discussed below are some of the tax benefits that can be derived from such collectibles.
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. This could lead to savings substantially for people residing in states with high sales tax rates. 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 familiar with section 1031 of the IRS code which allows like-kind exchanges, where property owners are allowed to trade appreciated properties without incurring any tax liabilities. Similarly, rare coin collectors can make exchanges subject to section 1031 of the IRS code however, as with real estate, the key to deferring any taxes is compliance to the regulations. Investors therefore are not allowed to mix and match rare coins with bullion coins on the exchange.
Coin collections can lead to expenses such as insurance, trading fees, travel to conventions, journals and security, whose treatment is dependent on whether the owner is a dealer, investor or collector. Despite being liable for taxes on gains, collectors are considered as hobbyists by the IRS, who merely collect coins for enjoyment.