• Products
  • Insights
  • Practice Management
  • Resources
  • About Us
number one

There are capital gains and capital-gains distributions. If you sell an investment for more than its cost basis (its purchase price adjusted for dividends and distributions), that’s a capital gain. Fund managers buy and sell holdings throughout the year and are legally required to pass profits from those sales on to shareholders—those are capital-gains distributions.

number two

Capital-gains distributions aren’t a response to action on your part. You can receive a capital-gains distribution from a fund you own even if you haven't sold any shares. Funds are required to distribute nearly all the capital gains they accrue at least once a year.  

number three

You could see distributions even if your fund is in the red. You can receive capital-gains distributions even if the fund you own posted negative returns for the year. This happens when a fund manager sells underlying shares for a profit even though the fund itself experienced a loss.

number four

The tax man won’t cometh (in a retirement account). Capital-gains distributions aren’t taxable if they’re from a fund you own in a tax-deferred account such as a 401(k), 403(b), or IRA—unless you make a withdrawal from those accounts instead of allowing them to be reinvested. 

number five

A gift that could keep on giving. In a tax-deferred account, if you reinvest your capital-gains distribution to purchase additional shares, it’s not a taxable event.

number six

For non-retirement accounts, how much you owe Uncle Sam depends on length of ownership. If an asset is sold within a year or less of its purchase, it’s considered a short-term capital gain and is taxed at the same rate as your ordinary income. Investments sold after more than one year are considered long-term capital gains and are generally taxed at a lower rate than your ordinary income (see tables below).

number seven

Dividends are different than capital gains. Dividends are a share of earnings paid to current shareholders, typically at regular intervals. If you own individual stocks, the companies you own shares of may pay dividends directly to you. If you own a fund, it could distribute dividends to you, too. Conversely, capital gains are only created when an asset is sold, either by you or by your fund manager.

number eight

Look for IRS Forms 1099. If you still own your investments, you’ll likely receive a Form 1099-DIV. It lists all your dividend or capital-gains distributions for the previous tax year. If you sold an investment, Form 1099-B shows your capital gains (or capital losses if you sell an investment for less than its cost basis).

number nine

If you win some but lose more, it changes the situation. In taxable accounts, if all your capital losses are greater than your capital gains after netting them out on Form 1099-B, it could negate your tax liability. You may also be able to deduct up to $3,000 of your losses on your tax return each year if they exceed your gains, and you can carry those losses forward in future years.

number ten

Some funds distribute more than others. Exchange-traded funds (ETFs), for example, tend to have relatively low turnover (e.g. they buy and sell securities less frequently), so they may have lower capital-gains distributions than many other investments.

Tax Rates for Capital Gains Vary by Income Level
2023 Capital Gains Tax Brackets 

Single Filers 

Income Level Long-Term Tax Rate Short-Term Tax Rate*
<$44,625 0%
≥$44,625 and <$492,300 15% 22–35%
≥$492,300 20% 37%


Married Filing Jointly

Income Level Long-Term Tax Rate Short-Term Tax Rate*
<$89,250 0%
≥$89,250 and <$553,850 15% 22–35%
≥$553,850 20% 37%


Head of Household

Income Level Long-Term Tax Rate Short-Term Tax Rate*
<$59,750 0%
≥$59,750 and <$523,050 15% 22–35%
≥$523,050 20% 37%

Data Sources: TaxFoundation.org and IRS, as of 10/23. *Range shown because the actual rate depends on an investor's tax bracket. 

If you have questions about capital gains and capital-gains distributions, talk to your financial professional or tax professional. 


All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable. The preceding is not intended to be a recommendation or advice.

This information does not take into account the specific investment objectives, tax and financial condition of any specific person. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. 

CCWP052 3209459

The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, or ETF summary prospectus and/or prospectus, which can be obtained from a financial professional and should be read carefully before investing.

Mutual funds are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA|SIPC. ETFs are distributed by ALPS Distributors, Inc. (ALPS). Advisory services may be provided by Hartford Funds Management Company, LLC (HFMC) or its wholly owned subsidiary, Lattice Strategies LLC (Lattice). Certain funds are sub-advised by Wellington Management Company LLP and/or Schroder Investment Management North America Inc (SIMNA). Schroder Investment Management North America Ltd. (SIMNA Ltd) serves as a secondary sub-adviser to certain funds. HFMC, Lattice, Wellington Management, SIMNA, and SIMNA Ltd. are all SEC registered investment advisers. Hartford Funds refers to HFD, Lattice, and HFMC, which are not affiliated with any sub-adviser or ALPS. The funds and other products referred to on this Site may be offered and sold only to persons in the United States and its territories.

© Copyright 2024 Hartford Funds Management Group, Inc. All Rights Reserved. Not FDIC Insured | No Bank Guarantee | May Lose Value