Capital gains

You don't...

The capital gains value on the Schedule D is needed, and it DOES add to total AGI shown on line 15 of the form 1040....

BUT...the Schedule D value is then used on a separate tax calculation form to arrive at the tax in line 16 of the form 1040.

Usually, that tax calculation takes place on the "Qualified Dividends and Capital Gain Tax Worksheet", where the tax on capital gains is removed..(when appropriate)......but sometimes it happens on a different worksheet.

To see your actual calculation, you need to save your tax file as a PDF (with all forms and worksheets) if you are using the Online software....or if you are using the Desktop software, you can just switch to Forms Mode and find it there.

Capita gains are not excluded from your tax return.  They are just taxed at a lower rate than your ordinary income (in you case, that tax rate is 0%). So, TurboTax is doing it correctly to include your capital gains on form 1040 and in calculating your taxable income. Your taxable income (line 15 of form 1040) will include the capital gain.  But, rather than a straight look up, in the tax table, a complicated calculation will be made on the "Qualified Dividends and Capital Gains Worksheet".  For more complex situations, the "Schedule D worksheet" will be used instead.