5 Financial Tips on Jewelry

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Contributor, Benzinga
March 10, 2023

Jewelry can be a beautiful and valuable asset, but it requires careful consideration and planning to maximize its value. Whether you are buying jewelry for personal use or as an investment, it is essential to invest in high-quality pieces, get regular appraisals and obtain dedicated jewelry insurance to help protect your items and ensure their longevity. 

When it comes to selling jewelry, understanding the tax implications can help minimize your liability if you sell or pass down your pieces. By following these tips, you can ensure your jewelry investment will be a source of joy and financial security for years to come.

Make a Smart First Investment

Investing in fine jewelry can help build your wealth over time, but purchasing the right pieces for your collection is critical. Avoid impulsive or trendy purchases that won’t appreciate over time. 

Invest in timeless pieces that are likely to remain popular and in demand. Classic styles, a solitaire diamond engagement ring or yellow gold luxury timepieces from reputable brands like Cartier or Rolex are good choices for first-time jewelry investors.

Before you start shopping in-store, make sure you have a clear idea of what you’re looking for by answering the following questions:

  • What type of gemstone or diamond am I looking for?
  • What are my expectations for the cut, color, clarity and carat?
  • What type of style am I looking for? 

Document Your Jewelry

Protect and document your jewelry with appraisals. An appraisal is a document with detailed information about your jewelry item. This includes purity and quality, identifying hallmarks or maker’s marks, historical or cultural significance and market and replacement value. Getting your jewelry appraised is critical if you want to purchase insurance, resell your piece or understand what it’s worth for tax purposes. 

While there are no strict regulations on who can perform an appraisal, always ensure your appraisal is performed by a jeweler accredited by a professional organization, such as the National Association of Jewelry Appraisers. This ensures that all information provided on your appraisal certificate is accurate.

Keep Heirloom Jewelry as a Family Investment

Family heirloom jewelry can be a valuable and meaningful investment. But you need to take steps to protect and preserve your pieces, whether you want to sell them or keep them for future generations. To keep your heirloom jewelry in tip-top shape it is recommended to give them a proper cleaning every few weeks if you wear it regularly and at least once a year if you do not wear the item very often.

If your recently inherited family heirlooms don’t match your style, decide whether you want to repurpose heirloom jewelry or sell it. Many families upgrade heirlooms with modern design elements and pass them down for special occasions like engagements, weddings or coming-of-age ceremonies. 

To sell your heirloom pieces, source a reputable local or online jeweler or auction house. Your options for selling your pieces depend on how valuable the item is and whether you can establish its provenance. Some reputable online auction sites include Worthy.com and Liveauctioneers.com.

If you want to keep heirlooms in the family, it’s important to understand how to pass on heirloom jewelry legally. You should include your pieces in your estate plan by adding them to your will. The best way to do this is through a personal property memorandum, which is a document that assigns each of your assets to a specific person. 

Take Out Insurance on High-Value Pieces

When you own valuable jewelry, insuring your pieces protects you from financial loss if the item is stolen, damaged or lost. Jewelry insurance allows you to file a claim to replace your important pieces, whether buying a replica or a piece of equal value. 

While many rely on homeowners’ or renters’ insurance to insure their jewelry, these policies typically don’t provide adequate coverage. Coverage limits on homeowner’s insurance claims for jewelry are typically between $1,000 and $2,000, which means if your pieces are worth a higher amount, you will have to pay the difference out of pocket. 

For example, if you own a diamond engagement ring you purchased for $10,000, you’d be out around $8,000 after your insurance claim payout. Many homeowners’ insurance policies also don’t cover damage or loss outside of normal perils like fire, theft or vandalism. If you mysteriously lose a ring or drop a valuable earring down the drain, you won’t be able to file a claim. 

Specialized Jewelry Insurance

Specialized jewelry insurance is an excellent alternative to homeowners’ or renters’ insurance coverage for your meaningful pieces. For example, BriteCoTM offers full-protection coverage for all jewelry types, including rings, watches, bracelets and earrings. Its policies cover loss, damage, theft and mysterious disappearances at 125% of your pieces’ appraised value. 

Because specialized jewelry insurance is tailored to jewelry pieces, it offers a more streamlined enrollment and claims process than other types of insurance. With BriteCo, you can get a quote in as little as a few minutes using a convenient online platform and file a claim using the online claims submission form. 

Unlike homeowner’s insurance, you can pay for specialized jewelry insurance in yearly or monthly premiums. BriteCo doesn’t charge a deductible to file and won’t raise your premium for filing a claim. 

Understand Your Tax Liability

When buying or selling high-worth jewelry pieces, you must understand your potential liability regarding taxes. For example, you’ll have to pay sales tax when you buy jewelry and a capital gains tax if you sell a high-dollar piece for more than you paid. The inherited jewelry tax may apply if you inherit jewelry or leave an heirloom to your family. 

  • Sales Tax

In the U.S., all states except Alaska, Delaware, Montana, New Hampshire and Oregon require a sales tax on the purchase of jewelry. Sales tax percentages vary by state. For example, the average rate in New York is about 8.52% when state and city taxes are combined.  This means if you were to buy a $7,000 ring, you’d pay around $600 in taxes. 

If you buy from an online retailer, you may not have to pay sales tax, but a use tax may still apply, so be prepared to pay some form of tax on your purchase. 

  • Capital Gains Tax

If you have jewelry you want to sell, you may have to pay capital gains taxes if you make a profit. The IRS charges capital gains taxes on the gains you make from selling an asset you’ve had for more than one year. 

The tax rate depends on your income and the jewelry sold, but most people pay between 0% and 15%. If you sell collectible jewelry, such as a vintage Rolex featuring gemstones, gold, platinum or silver, you may pay a 28% capital gains tax on the profits. 

  • Inherited Jewelry Tax

For inherited pieces, capital gains may apply if you sell the item for a profit. But you might also have to pay estate taxes if you inherit a high-value collection that is part of an estate worth over $12.92 million

Make Smart Financial Decisions With Your Jewelry Pieces

High-value jewelry makes an excellent investment for your financial future. Having a collection of jewelry or watches gives you an asset you can sell if needed or a beautiful piece you can gift to your children or grandchildren in the future. 
When you buy the right pieces and protect them with affordable, full-coverage jewelry insurance, you can pass on your investment to your family, keeping them financially secure for years to come.