Capital Gains distribution on form 1099 but no sale

[aE]

On a form 1099-DIV, box 2a for one of my longer-term funds has a very large number but I didn't touch the account last year or in any other year. In the details of the 1099, it describes one of the funds as a Long Term Gain. When I put that figure into box 2a, my refund went from positive to a big tax bill owed. But again, I didn't sell anything and looking at the account, it was basically unchanged from 2020. This is an account I invested in years ago and this year is the first time I'm seeing this. 

How do I treat this? Am I misreading the details of the 1099 - is there some area in TT where I enter any offsets? 

[AnnetteB6 · Accepted solution]

A capital gains distribution reported in box 2a of Form 1099-DIV represents your share of capital gains that are a result of the mutual fund selling some of its holdings for a gain.  The capital gains distribution is taxable to you even if you never sold anything or received any actual income from the mutual fund.  

The only thing you can do on your tax return is to enter the amount reported in box 2a in the dividends section of your return.  There is nothing you can enter to offset that income.  

[mesquitebean]

@aE 

The good news is that the program treats such capital gains distributions as long-term gains, which receive preferential tax treatment.  Depending on your overall income level, all or a portion of a capital gains distribution may be taxed at the 0 (zero) % capital gains tax rate, or for higher income folks, some portion may be at the 15% or 20% capital gains tax rate.   How it breaks down all depends on your overall income.

If you have any "qualified dividends" (Box 1b on a 1099-DIV), they, too, receive the same preferential tax treatment.