Is there a way to not have mutual fund capital gains not taxed as ordinary income? Turbo Tax software doesn't seem to be applying the lower tax rates.

[Anita01 · Accepted solution]

If you enter the amount as capital gains, the program will indeed tax them correctly.  You cannot just watch the monitor to see the change in tax due because the monitor does not reflect just tax on the additional income.  When you enter income of any type, that amount changes your Adjusted Gross Income, causing many other changes in your return regardless of the tax rate applied to that specific income.   When you print your return, you will see a capital gains worksheet showing the tax calculated on that specific income.