About Capital Gain Distributions

Capital gains are profits from an investment. Unless invested through a tax-deferred vehicle like an IRA or 401(k), investors typically owe Federal capital gains tax when they sell all or a portion of their investment for more than what they paid. In a mutual fund, capital gains can be realized in two different ways:

  • The fund investor can decide to sell or exchange at a profit
  • The fund manager can decide to sell or exchange securities within the fund for a profit

If the investor sells shares, they and their tax advisor calculate their gain or loss based on IRS Form 1099-B that Voya Funds sends out in January. If the fund sells shares for a profit, the proceeds are distributed to shareholders and reported on IRS Form 1099-DIV.

The Record Date, the Ex Date, and the Payable Date

Record Date

If the fund sells shares, it makes a per-share distribution to all shareholders as of a particular date (called the Record Date), regardless of how long they have been in the fund. Record Dates for Voya Funds vary; please find the fund(s) you are invested in on the Capital Gain Distributions page. Shareholders must own the fund on the Record Date to receive a distribution, and conversely must be out of the fund on that date to avoid one. Voya Funds in general does not recommend making investment decisions around capital gain distribution dates, but investors should consult with their tax advisors about their own situations.


Shortly after the Record Date, typically the next trading day, the Ex- (or Ex-Dividend) Date occurs. On this date, the dollar amount of the fund's capital gains distribution is temporarily taken out of the fund's assets. As a result, the fund's daily share price (NAV) typically drops. Market activity, of course, contributes to the final share price, as it would any day, but there is always the additional "hit" of the capital gains payout being taken out of the share price of the fund.

Payable Date

The amount the fund lost is returned to shareholders on the Payable Date, which usually occurs within three business days of the Record Date. If shareholders elect to have their capital gains distributions reinvested, new shares are purchased in their account as of the lower price on the Ex-Date. If shareholders elect to have their capital gains sent to them, a check is mailed on or near the Payable Date.

Short-Term vs. Long-Term Capital Gains

There are two kinds of capital gains for tax purposes, short-term and long-term capital gains. Long-term are those held for 12 months or longer, short-term those held for less time. The process for short- and long-term capital gain distributions is the same as described above, but the tax treatment is different. For that reason, they are reported separately. Investors who sell shares must determine whether the gain (or portion of the gain) is short- or long-term based on their own records.

Short-term capital gains are taxed at the investor's own Federal Tax Rate, the same as dividend income, wages and other ordinary income. Long-term capital gains, on the other hand, are taxed at a more favorable rate:

15% for individuals in tax brackets higher than 15%

0% for individuals in tax brackets that are 15% or lower

Are Capital Gains Possible If a Fund Has Declined in Value?

When Funds sell securities as a tactical move or to meet redemptions, they are required by law to report in that year any capital gains generated on that holding over the time they held the security. Thus, investors may find themselves with large capital gains distributions passed through to them, even though the fund itself has lost value. Portfolio managers try to balance tax with investment considerations when trading securities, but this is not always possible, nor desirable from a total return standpoint.

Other Things to Note:

  • Many funds also distribute year-end dividend distributions. These are the result of accruals of dividends and other forms of investment income in the fund for the year. Like capital gains, they are reflected in the share price until they are distributed, usually at the same time as the capital gains distribution. These are treated for tax purposes as dividend income, and taxed at the individual's personal tax rate.
  • Distributions, whether capital gains or dividend, may also be subject to state and local income taxes, intangibles and/or inheritance taxes at the federal and state level, and, for some taxpayers, Alternative Minimum Tax.
  • A foreign tax credit is available for fund shareholders with a substantial portion of their assets invested in foreign securities. The amount of the credit is available on voyainvestments.com in late January, and is included in shareholder tax statements.
  • It is generally not advisable for taxable investors to purchase large amounts of shares just prior to a dividend or capital gains distribution, since a portion of the purchase price will be returned to the investors as a taxable distribution.
  • Please consult your tax advisor about capital gains and all other tax issues. Voya does not offer tax advice because every individual situation is different.

Voya IM does not provide tax or legal advice. This information should not be used as a basis for legal and/or tax advice. In any specific case, the parties involved should seek the guidance and advice of their own legal and tax counsel.