In 2022 I sold a rental property with $288000 in capital gains. My understanding is the capital gains tax should have been 15%, or just over $43K.
Turbotax asked me questions about the sale and my 1099-S. It then filled in Form 4797 Sales of Business Property with $165K as a "Sale of Property Used in a Business" and $123K (for the land) as an "Ordinary Gain."
It then entered the $165K on Form 1040 Line 7 as a "Capital gain", and the $123K on line 8 as "Other income". Both were then added to my W-2 income to get my total income. Then it calculated my tax as if the Capital Gain was just part of my normal income.
As far as I can tell, I ended up paying almost $77K, or 25.8% tax on the gain. What went wrong?
