The Internal Revenue Service (IRS) applies specific rules to the taxation of capital gains, which vary depending on the type of asset, the holding period, and the taxpayer’s overall income. For taxpayers filing jointly in 2026, long-term capital gains and qualified dividends are taxed at rates of 0%, 15%, or 20%, depending on their taxable income excluding these gains.

Taxpayers with ordinary income below certain thresholds may benefit from a 0% capital gains tax rate on part of their long-term gains. For example, married couples filing jointly with taxable income other than capital gains or qualified dividends under $98,900 qualify for this rate, which applies to gains up to that limit. Beyond that threshold, long-term gains are taxed at 15% or higher. In a scenario where a couple reports $60,000 in ordinary income and realizes $150,000 in long-term capital gains, approximately $38,900 of the gains could be taxed at 0%, while the remaining $111,100 would be subject to a 15% rate. It is important to note that while the 0% rate means no federal tax on that portion of the gains, it still increases adjusted gross income, which can affect other tax considerations. Additionally, state tax treatment may differ.

Capital gains distributions from stock mutual funds often present a different tax picture. These distributions can consist of short-term capital gains, which are taxed as ordinary income at rates up to 37%. This is because mutual funds frequently buy and sell assets with holding periods of less than a year, generating short-term gains that pass through to investors. To mitigate the impact of these potentially tax-inefficient distributions, investors may consider holding high-turnover mutual funds within tax-deferred accounts such as IRAs, where taxes on capital gains can be deferred or avoided.

Investments in gold and other precious metals follow distinct rules. Physical holdings of gold, whether coins, bars, or ingots, are classified as collectibles by the IRS. Long-term capital gains on collectibles held for more than one year are subject to a maximum tax rate of 28%, which is higher than standard capital gains rates. Short-term gains on physical precious metals are taxed as ordinary income. Capital losses are also recognized when sales occur below cost basis. Similarly, investing through exchange-traded funds (ETFs) that hold physical precious metals typically results in gains being treated as collectible gains, subject to the same 28% rate upon sale if held over one year. The preferential 0%, 15%, and 20% capital gains rates generally do not apply to these holdings.

Understanding these distinctions can assist investors in planning their portfolios and tax liabilities effectively.