Quick Take: What You Really Need to Know About IAUM and Taxes
If you’re holding IAUM (iShares Gold Trust Micro), you might be surprised to learn that its tax treatment isn’t as simple as your everyday stock ETF. I’ve spent hours combing through IRS publications, fund documentation, and even called up a CPA friend to untangle this. Here, I’ll walk you through what I wish someone had told me before I made my first IAUM trade—from the unexpected tax rates to the real-world steps when you sell, plus a dash of my own missteps. I’ll share screenshots, real law references, and even what happens if you mess up your cost basis. And, just for fun, I’ll compare how other countries handle similar gold ETFs so you see how unique (and sometimes frustrating) the U.S. system can be.
The Basics: Why IAUM Is NOT Like Your Typical ETF
Let’s start with the biggest misconception: IAUM isn’t just another stock ETF. It’s structured as a grantor trust that physically holds gold bullion (you can check the official IAUM prospectus). That means for U.S. tax purposes, you are considered to own a slice of actual gold. This is where things get tricky, because the IRS treats gold as a “collectible” under IRC Section 408(m) (see Cornell Law).
When you sell IAUM, you are taxed on any capital gain, but here’s the kicker: long-term gains are taxed at a maximum rate of 28%, not the usual 15% or 20% you might expect from stocks or most ETFs. Short-term gains are taxed at your ordinary income rate. So, if you’ve held IAUM for over a year, you still might be paying more tax than you would on, say, SPY.
Step-By-Step: What Happens When You Sell IAUM
Let me walk you through an actual sell scenario using my own experience (yep, I messed up my cost basis and had to fix it). Here’s how it plays out on your tax return:
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Track Your Cost Basis: Your brokerage should report the cost basis, but for IAUM, sometimes they treat it differently due to its trust structure. Double-check your 1099-B for the correct acquisition date and price. (Screenshot below from Fidelity, which initially listed IAUM with “unknown” cost basis—took me an hour with customer support to fix!)
- Report on Schedule D: Gains or losses from selling IAUM go on Form 8949 and Schedule D, just like stocks. But you must indicate it’s a collectible. Some tax software will prompt you; others (like TurboTax) might require a manual override. My first year, TurboTax defaulted to the regular cap gains rate—didn’t catch the error until my CPA flagged it. (See IRS Schedule D instructions.)
- Apply the 28% Rate: If you held IAUM over a year, the gain is subject to a maximum 28% rate. If your ordinary bracket is lower, you pay the lower rate. If you’re higher, 28% is the cap. Short-term gains (less than a year) are taxed as ordinary income.
- Watch for State Taxes: Some states, like California, tax capital gains as ordinary income regardless of federal classification. My California return didn’t care about the collectible distinction—just taxed the whole gain at my marginal rate.
Example: My Actual IAUM Sell
Bought 100 shares IAUM at $18.10, sold a year later at $20.40. Net gain: $230. Since I held over a year, the gain is long-term, but here’s the twist—my federal tax bill was $64.40 (28%), not the $34.50 (15%) I’d expected if it were a standard ETF. California added another $22 on top. If I’d sold after 11 months, I’d have paid over $80 (ordinary income rate).
So, don’t assume your software or broker will get this right—always review your 1099-B, and double-check the “collectible” box is selected in your tax return.
How Does IAUM Compare to Gold ETFs Abroad? A Global Perspective
This is where it gets wild. In the U.K., for example, most gold ETFs are structured as “exchange traded commodities” and can be held in an ISA (tax-free wrapper). In Germany, gold ETCs can be tax-free if held over a year. But in the U.S., you’re stuck with the collectibles rule—there’s no way around it, even in an IRA, unless your IRA specifically allows physical gold (which is rare, complicated, and expensive).
| Country | Product Name | Tax Rate/Rule | Legal Basis | Regulator |
|---|---|---|---|---|
| United States | IAUM (iShares Gold Trust Micro) | 28% max (collectibles) IRC 408(m) |
IRC Section 408(m) | IRS, SEC |
| United Kingdom | ETC (e.g., iShares Physical Gold ETC) | CGT rates; tax-free in ISA/SIPP (see UK Gov) |
HMRC rules | FCA, HMRC |
| Germany | Gold ETCs | Tax-free after 1 year holding | EStG §23 | BaFin, BZSt |
| Australia | Gold ETFs | CGT at individual’s marginal rate | ATO CGT rules | ASIC, ATO |
Case Study: U.S.–Germany Disagreement on Gold ETF Taxation
In 2022, a friend of mine (let’s call him Mark) moved from Germany to the U.S. He’d held Xetra-Gold for over two years in Germany, where it was tax-free. But when he sold after moving to the U.S., his American tax preparer flagged the gain as “collectible” and applied the 28% rate. Mark was shocked—the same product went from tax-free to a high-tax collectible overnight, just by changing residency. We double-checked with both a U.S. CPA and a German Steuerberater, and that’s the law: your tax residency at the time of sale controls the outcome.
Expert Viewpoint: Why Does the IRS Treat Gold This Way?
I once sat in on a tax seminar with Robert Willens, a renowned tax expert (he’s often quoted by Barron's). His take was blunt: “Congress wants to discourage speculative investment in physical metals, so they set a punitive tax rate. ETFs that actually hold gold inherit this treatment—even though, for most people, they’re a lot safer than coins under your mattress.” He pointed out that unless the ETF is structured as a standard investment company (which IAUM isn’t), you’re stuck with the 28% rule.
Lessons Learned and Practical Tips
- Always verify your cost basis and holding period for IAUM in your brokerage tax documents.
- Don’t expect your tax software to automatically apply the collectibles rate—check the details manually.
- Consider the impact of state taxes, especially in high-tax states like California or New York.
- If you’re planning to move abroad, remember your residency at the time of sale determines your tax treatment.
If you want to avoid the 28% rate, consider gold-mining stock ETFs (like GDX), which are taxed as stocks. But they’re not a direct gold exposure. And if you’re using IAUM in an IRA or Roth IRA, check with your custodian—most don’t allow it, or charge high fees.
Conclusion: Is IAUM Worth It, Tax-Wise?
From my own, occasionally painful experience, IAUM is a convenient way to get gold exposure, but the tax bite is real. If you’re a U.S. taxpayer, plan for the 28% collectibles rate on long-term gains. Always double-check your forms, especially if your broker’s reporting looks odd. And if you’re thinking globally, know that Americans pay more tax on gold ETFs than nearly anyone else!
If in doubt, talk to a tax pro who understands collectibles and grantor trusts. Or just keep it simple and use a diversified ETF for your core portfolio—I learned the hard way that chasing gold can come with a surprise at tax time.
For further reading, check the IRS Topic No. 409 - Capital Gains and Losses and the S&P Global article on U.S. gold ETF taxation.