By Joy Taylor
From Kiplinger’s Personal Finance
The editor of The Kiplinger Tax Letter responds to readers asking about the IRS treatment of capital gains.
Question: I generally have about $60,000 of taxable income from pensions and other sources of ordinary income when I file my tax return. However, this year I sold a large investment, generating a $150,000 long-term capital gain. I am married and file a joint return. Will any of my capital gains be taxed at the zero percent capital gains rate?
Answer: For 2026, if taxable income other than long-term capital gains and qualified dividends doesn’t exceed $49,450 on single filers, $66,200 on head-of-household returns or $98,900 on joint returns, then qualified dividends and profits on sales of assets owned for more than a year are taxed at a zero percent federal income tax rate until they push you over the threshold amounts.
In your situation, it appears that part of your gains would be taxed at the zero percent capital gains rate and the rest at the 15 percent capital gains rate. Based on your facts, you would have $210,000 of taxable income ($60,000 of ordinary income and $150,000 of long-term capital gains). The zero percent rate would apply to $38,900($98,900 – [$210,000 – $150,000]) of your long-term capital gain, and $111,100 would be taxed at the 15 percent rate.
Note that although these 0 percent-rate capital gains might not be taxed at the federal level, they do increase your adjusted gross income. Also, capital gains may be taxed differently at the state level.
Question: I invest in stock mutual funds. Every year, I pay a lot of tax on capital gains distributions from these funds at ordinary income tax rates. My accountant tells me that this income doesn’t qualify for the lower tax rates on long-term capital gains. Why is this the case?
Answer: Net short-term capital gains are taxed at ordinary income rates up to 37 percent. This applies to gains from the sale or exchange of capital assets held for a year or less, which can include capital gains distributions from stock mutual funds. Some of these funds frequently buy or sell holdings that can potentially generate big short-term capital gains distributions.
Before you invest in a stock mutual fund, check its turnover ratio. The higher the ratio, the higher the potential for tax-inefficient short-term capital gains distributions. One way around this hazard is to keep high-turnover mutual funds in an IRA or another tax-deferred account instead of in a taxable account.
Question: I am thinking of investing in gold. If I buy the physical product, will any gains when I sell get the favorable capital gains tax rates? Is the answer different if I invest in an exchange-traded fund?
Answer: The tax law treats physical holdings in precious metals as collectibles. This is true whether you hold coins, bars, ingots or other forms of physical holdings.
When you sell, your gain or loss is the difference between the selling price and your cost basis in the metal. Most people who sell will have a capital gain or loss. Capital gains from the sale of precious metals held for more than a year are taxed at a capital gains rate of up to 28 percent. Capital gains from the sale of precious metals held for a year or less are taxed at ordinary income rates. If you sell for a loss, then you will have a capital loss.
If you invest in an exchange-traded fund that holds gold or silver in physical form, and you sell your interest more than a year later, then your gain will often be taxed at a top 28 percent tax rate, similar to the rate you’d pay by owning the physical gold outright and then selling it. The 0 percent, 15 percent or 20 percent capital gains rates generally don’t apply because you are treated as holding a collectible.
©2026 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.
The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
