Long Term Capital Gains

[bob5120]

I sold a 10 year old property with a sales price of 500,000 and a cost basis of 16,100.  Why does TurboTax not give me the 15% Long Term Capital Gains rate?  It seems to be charging me close to the 20% rate?

[DianeC958]

It is because your income on the capital gain is over $483,900 before you add any other income.  

Just like the tax brackets depend on the amount of income tax you pay the same is true with Capital Gains.  When you total income exceeds the amounts below you end up being charged a higher tax rate on your Capital Gains.

FILING STATUS                        0%                 RATE15%                      RATE20% RATE

Single                                Up to $39,375       $39,376 – $434,550      Over $434,550

Married filing jointly         Up to $78,750       $78,751 – $488,850      Over $488,850

Married filing separately  Up to $39,375       $39,376 – $244,425      Over $244,425

Head of household           Up to $52,750       $52,751 – $461,700      Over $461,700

Link to more information about Capital Gains

[bob5120]

Thank you for your reply.  I am filing Married Filing Jointly so isn't my 483,100 below the 20% long term Capital Gains threshold?

[ColeenD3]

Taxpayers with modified adjusted gross income above certain amounts are subject to an additional 3.8 percent net investment income tax (NIIT) on long- and short-term capital gains.

Please see the following LINK for more information.

[bob5120]

Read the link but not sure what my numbers should be.  I guess it is saying that with a gross adjusted income of slightly over 100K plus this investment sale of 483,900, it puts me over the (married, filing Jointly)  250,000 threshold for this 3.8% Net Investment Income Tax.  I will have to see a CPA to do my taxes this year since TurboTax does not explain how it arrived at my numbers.  Thank you very much for your help.

[bob5120]

Thank you for your answer.  So since the long term capital gains is computed in the adjusted gross income, the NIIT almost always is implemented.  So I would guess there is really no 15% Long Term Capital Gains Tax!

[ColeenD3]

Yes, there is, but you have to be under the $250,000 MFJ threshold.