Must You Pay Taxes On ETF Holdings If You Never Sell? A Gold Investor's Guide

Many investors hold onto their gold ETF shares for years, believing they won’t owe taxes until they actually sell. But here’s what catches most people off guard: the answer is “it depends”—and the tax liability on ETFs differs significantly from what most investors assume. Understanding these rules is critical before building a gold ETP position, especially as precious metal prices remain elevated.

The Common Misconception About ETF Taxation

The widespread assumption is straightforward: no sale equals no taxes owed. This logic works fine for stocks, but gold ETFs and other commodity-focused exchange-traded products operate under different rules. The IRS doesn’t always wait until you sell to tax your gains. In fact, the structure of your gold investment fundamentally determines whether you face annual tax obligations—regardless of whether you’ve sold a single share.

When you do eventually sell, you’ll typically file a 1099 form to report capital gains or losses. However, the tax rate depends on your holding period and income bracket. Long-term holdings (beyond one year) receive preferential rates of 0%, 15%, or 20% for most investors in 2026, while short-term gains face ordinary income tax rates ranging from 10% to 37%.

How Futures-Based Gold ETFs Create Annual Tax Bills

Exchange-traded funds tracking gold futures contracts offer convenient exposure to price fluctuations without storing physical bullion. But here’s the catch: these funds are structured as partnerships, not trusts. This partnership structure triggers mandatory annual taxation.

Rather than waiting until sale, futures-based ETFs require you to report gains using a K-1 form, issued every year. The IRS mandates a fixed calculation: 60% of gains are treated as long-term and 40% as short-term—regardless of how long you’ve actually held the shares. This hybrid approach means you could owe taxes in years when the fund value hasn’t changed.

Examples of futures-focused gold ETFs include:

• ProShares Ultra Gold (UGL)
• iShares Gold Strategy ETF (IAUF)
• DB Gold Double Long Exchange Traded Notes (GLDX)

With K-1 forms arriving annually, you’ll report taxation every year the fund generates gains—not just when you sell.

Physical Gold ETFs and the Hidden 28% Tax Rate

Physically-backed gold ETFs provide direct exposure to the precious metal stored in vaults, and the IRS treats them with special designation: they’re classified as collectibles. This classification has significant tax consequences.

If your gold ETF is structured as a grantor trust, long-term capital gains face a maximum rate of 28% instead of the standard 20%. That’s an extra 8 percentage points for top earners—a substantial difference on large positions.

Troy Lewis, an accounting and tax professor at Brigham Young University, explained the distinction to CNBC: “In your mind, you think, ‘I’m just buying a stock.’ But the IRS has taken the position they’re actually collectibles because they’re backed by bullion.”

Popular physically-backed gold ETFs include:

• SPDR Gold Trust (GLD)
• iShares Gold Trust Micro ETF (IAUM)
• abrdn Physical Gold Shares ETF (SGOL)
• GraniteShares Gold Trust (BAR)

The key distinction: futures-based gold ETFs taxed as partnerships avoid the 28% collectibles rate, capping out at 20% because they’re treated differently under tax code.

ETNs Offer a Different Tax Path

Exchange-traded notes (ETNs) tracking gold follow yet another structure. Unlike futures-based ETFs requiring K-1 forms, ETNs use standard 1099 reporting, applying conventional short- and long-term capital gains rates. No annual K-1 complications arise.

Examples of gold ETNs:

• DB Gold Short Exchange Traded Notes (DGZ)
• DB Gold Double Short Exchange Traded Notes (DZZ)

This simpler structure appeals to investors seeking straightforward tax reporting without the partnership complications.

Key Takeaways: Managing Your Gold ETF Tax Strategy

Before committing capital to gold ETFs, understand this fundamental truth: do you pay taxes on ETF investments without selling? Yes—potentially. Futures-based funds create annual tax obligations through K-1 reporting, while physical gold ETFs impose elevated collectibles rates. ETNs offer conventional treatment.

The complexity of gold ETF taxation makes professional guidance essential. Tax professionals can evaluate your specific situation, compare different fund structures, and identify strategies that align with your overall portfolio and tax bracket. The difference between choosing the right vehicle versus the wrong one could easily justify a consultation fee.

For current tax rates, filing requirements, and specific guidance on your holdings, consult a qualified tax advisor before making investment decisions.