We sold a house (capital gain=$158K). In a lower tax bracket (our income=$20K), we should be taxed 0% on long term cap gains. Your software says we owe $28K tax. Why?

The $158K includes depreciation recapture of $33K (added onto our net) but does not include $46K in refurbishment expenses (we entered it, but it is not being included in the cost basis calculations).