Rare coin collecting is an interesting hobby as it happens to be one of the many kinds of coin collecting that exist. Often, rare coins get valued based on the amount of bullion they contain i.e. silver, copper or gold. Different kinds of coins contain varying percentages of other kinds of metals such as zinc and nickel. Rare coin collecting happens to be an interesting way of making money, and if you happen to be relatively new at it then you should consider purchasing a coin collector’s book that explains the value of various coins whether 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. The following are some possible tax advantages 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. This could lead to savings substantially for people residing in states with high sales tax rates. The exemption is quite practical in value since it encourages people to work with dealers within their own state rather than purchasing from out-of-state dealers trying to evade local sales tax. On that note, rare coins are different from jewellery and watches which people may purchase as luxury items, because while those gets taxed as consumer purchases, rare coins get treated as investments hence no sales tax.
Most real estate investors know the IRS code section 1031 which allows like-kind exchanges for appreciated properties without creating 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 required to only exchange rare coins for other rare coins and bullion coins for other bullion coins.
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. According to the IRS, collectors are considered as hobbyists who only collect for mere enjoyment therefore, their ability for claiming expenses is limited despite being liable for taxes on gains.