If you have been lucky enough to find gold on your prospecting outings, you are probably wondering what will happen to the treasure you recovered after you sell it. Will you be able to keep all the earnings of your hard work?
In the United States, gold prospecting is not tax-free. In the US, treasure troves are considered included in the year’s gross income and are therefore taxable. The taxes a prospector will pay relates to the value of the gold recovered and sold.
Of course, there is more to know about how gold findings and recovery are taxed. Read on to check what you should include in the documentation for next year’s taxes.
Is Gold Prospecting Tax-Free?
Prospecting can be highly profitable, especially as you improve your skills and start recovering more and more gold nuggets and flakes. However, once you have decided to sell your findings, you might stumble across the dilemma regarding whether you should pay taxes on such earnings.
Below, we will have a look at the difference between prospecting and mining for gold. However, it is essential to know that you will need to pay taxes on your self-panned gold nuggets that you have decided to sell.
Indeed, according to the 1953 Revenue Ruling, a prospector (finder) of treasure troves is in possession of taxable income. This is considered part of the gross income to declare on the tax documentation (Rev.Rul. 61, 1953-1, Cum.Bull. 17). In this case, the amount of taxes to pay will correspond to a percentage of the value of gold retrieved in US currency.
However, it is also vital to notice that such laws will change depending on the country you are in prospecting. For example, the Australian Government distinguished between “bona fide” prospectors (small-scale explorers and miners) and large mining sites.
Generally, most gold-producing nations impose several taxes on mining operations and prospecting. However, these taxes might be tailored to the country’s economic situation and can vary widely.
Prospecting vs. Mining for Gold
For small-scale or “bona fide” prospectors, the amount of taxes to pay on the gold they have found is a fraction of the total value of the earnings deriving from the founding’s sale. However, more extensive mining operations and corporations are subjected to several other taxes, often regarding machinery and equipment, among other factors.
However, any prospectors should keep in mind that there are other fees associated with prospecting activities. You can check which ones apply to you below.
Gold Prospecting Fees and Taxes
In 1872, a Mining Law passed in America that states that any United States citizen, or individual that has expressed the desire to become one, is in the right to claim a portion of land to dedicate to gold mining and prospecting activities[1]. This regulation is still valid and can be applied to any area that has not already been assigned to other purposes.
Generally, small-scale prospecting operations are not subjected to as many laws as the one large-scale operations are. However, it is crucial to keep into considerations that prospectors might need to pay specific fees to be able to mine or prospect in a particular location and claim the rights on the gold they have found.
Moreover, different countries will subject prospectors to different laws. These often relate to the economic State of the country, as well as its financial and industry goals.
Lands and Prospecting Sites
Firstly, as we have seen, any prospector can claim a piece of land that is not already dedicated to other purposes for their prospecting activities. Additionally, a large part of the gold-bearing area in the Western United States is technically on public grounds, therefore free for prospectors to use.
The fee required to file and obtain a mining claim can vary depending on the location and claim type. For example, in terms of Placer Claims, prospectors will be required to pay a $20 processing fee and a $40 location fee. Additionally, there is a maintenance fee of $165 for every 20 acres (8 hectares) of land.
However, some areas are already set aside[2]. These include:
- Pieces of land included in National Parks
- Military land
- Reservoirs
- Indian reservations
- City-owned lands
- State-owned land
- Permanent lake beds
- Monuments
- Private lands
- Wilderness and protected areas
- Sections of forest and natural land reserved for research purposes.
In these areas, no prospectors can file a mining claim, as the land is already set aside for a specific purpose. However, this does not mean that prospectors will not be able to explore such a location. It means you won’t be able to claim the mineral rights within it[3].
Ultimately, if you are not sure whether the land can be claimed, prospected, or sampled, you should get in touch with the local relevant authorities to find out more about the local requirements.
Small-Scale Prospecting Activities
As mentioned above, small-scale prospectors are not usually subjected to several laws affecting the operation of large-scale mining sites. However, prospecting in an area might not always be free of charge.
Several factors play in favor of small-scale prospectors. Firstly, their activities do not tend to create a high environmental impact, and they don’t need as much documentation. Oppositely, large-scale operations need to file and obtain an approved Plan of Operation from the Forest Service[4].
Additionally, each State and country might apply different regulations to small prospectors looking at dredging for gold. Indeed, in many states, there are dredge-size limitations along some waterways and rivers. However, usually, these limitations do not represent a significant obstacle for panning and sluicing prospectors. Alternatively, $25 year-long permits for dredging are available in several locations.
Memberships
If you are not willing to file a mining claim and are not sure where you can prospect in all safety and legally, you could opt to join a local prospecting club[5]. Indeed, renting or buying a mining property can represent an inaccessible investment for the majority of amateur prospectors or anybody practicing this activity recreationally.
Instead, investing in memberships has many benefits, among which:
- It represents a more affordable investment that allows you to practice your skills before committing to claiming a mining site.
- Free mining properties in which you can increase your expertise without extra costs. The land available to you, in some cases, is more significant than 60 miles (almost 100km), much more that you would obtain through a mining claim.
- Enjoy access to resources and knowledge developed by other prospectors.
- Learn about the geology of the location you intend to prospect in the future while benefiting from coaching services and equipment rental.
There are several associations and organizations to choose from, but the most prominent one is the Gold Prospectors Association of America. A 2-year membership will cost you a little over $110 and will give you access to several claims, which make up 53052 acres (21470 hectares) across the country, as well as endless resources and support.
Conclusion
Gold prospecting can provide outdoorsman endless hours of recreational fun, yet it can also be a highly profitable activity. This statement is especially true as your prospecting skills and knowledge improve over time.
However, it is worth keeping in mind that often prospectors will have to pay taxes to the local Government regarding their findings. The amount to be paid varies depending on the quantity and value of the gold you have recovered.
Ultimately, there are several types of fees regarding mining and prospecting in a specific area that you will need to consider when estimating earnings.