How do the tax rates for treasure discoveries compare to ordinary income tax rates?
The tax rates for treasure discoveries are generally the same as ordinary income tax rates. There is no special tax rate or exclusion for treasure hunters. This means that any income earned from treasure discoveries is considered miscellaneous income and taxed at ordinary-income tax rates. So, treasure hunters may face tax rates of up to 37% at the federal level, depending on their income bracket, and their state tax rate on top of that.
Can treasure hunters use their discoveries as a tax write-off or consider it a business venture?
Treasure hunters can potentially use their discoveries as a tax write-off or consider it a business venture, but it depends on the individual circumstances. In the case of John Maxim and David Cline, who found gold coins, they could potentially use the treasure as a tax write-off and consider future treasure hunts as a business venture. However, they have chosen not to seek tax benefits or write-offs. On the other hand, treasure hunters like Andy Swanger, who found a $10,000 treasure, cannot use their discovery as a tax write-off or consider it a business venture. The income from their find is considered taxable and subject to ordinary-income tax rates.
What steps should treasure hunters take to ensure compliance with tax laws when reporting their discoveries?
To ensure compliance with tax laws when reporting their discoveries, treasure hunters should take several steps. First, they should document the discovery and take pictures of the found property. This documentation will serve as evidence in case of any disputes or questions from the tax authorities. Second, treasure hunters should keep records of the person they sold the property to and the amount received. These records will be necessary when reporting the income from the treasure discovery. Third, treasure hunters should provide the buyer with a written receipt to acknowledge the transaction. Finally, the amount received from the sale of the treasure should be included as income on the treasure hunter’s tax return. By following these steps and keeping accurate records, treasure hunters can ensure compliance with tax laws and avoid any potential issues with the tax authorities.
Full summary
Treasure hunting can be an exciting and lucrative endeavor, but it's important for treasure hunters to be aware of the tax implications they may face when making valuable discoveries. This article aims to provide valuable information on the tax requirements for treasure hunters and share some recent examples of individuals who have found treasure and the tax implications they faced.
Treasure hunters who make valuable discoveries are required to pay taxes on their finds. The tax is twofold: a levy upon acquisition and, if eventually sold, on the profit. Income is taxable unless excluded by the Internal Revenue Code or allowed for a tax deferral. However, there is no treasure-hunter exclusion, so the income is considered miscellaneous income and taxed at ordinary-income tax rates.
Recently, Andy Swanger made headlines when he found a $10,000 treasure near Heughs Canyon Trail. Swanger's discovery qualifies as additional taxable income, and he will have to pay both state and federal taxes on the treasure. The federal tax rate could be up to 37%, while the state tax rate is 4.95%. John Valentine, the state's tax commissioner, predicts Swanger will fall into the 12-22% federal tax range.
Taxation on buried treasures has precedence. In 2013, a couple had to pay taxes on gold coins they found. The buriers of the treasure, John Maxim and David Cline, might use it as a tax write-off and consider future treasure hunts as a business venture. However, they have stated that they will not seek tax benefits or write-offs.
Ermenegildo and Mary Cesarini also had an interesting tax experience when they discovered $4,467 inside a used piano. The IRS considered the found money as taxable income, and taxpayers are required to report all income from any source, including found money. The fair market value of found property is also taxable. It is important to document the discovery, take pictures of the found property, keep records of the person you sold it to and the amount received, and give the buyer a written receipt. The amount received should be included as income on your tax return.
In summary, treasure hunters need to be mindful of the tax implications of their discoveries. Whether it's a valuable treasure or found money, it is subject to taxation. It is crucial to follow the proper reporting procedures and keep accurate records to ensure compliance with tax laws. By understanding and managing the tax requirements, treasure hunters can continue to enjoy their exciting and potentially profitable hobby while staying on the right side of the law.
