I did this calculation using multiple scenarios, and TurboTax seems to handle it well. The form that the calculation ids done on is Qual Div/Cap Gn.
As a married couple the benchmark earnings is $80K. If you have earned income less than $80K, and you have Long Term Capital Gains. A portion or all of the LT Capital gain will incur zero tax.
Example: A married couple has an income of $85,000 from wages, social security, retirement income etc. They also have $25,000 of long term capital gain.
On you tax form 1040:
- Line 9 Total income: $85K + $25 K = $110
- Line 14 Standard deduction = $20,800
- Line 15 Taxable Income = $110,000 - $20,800 = $89,200
- This calculation is done on Qual Div/Cap Gn
- Taxable earned income: $89,200 - $25,000 (L/T) = $64,200
- Tax from tax table on $64,200 = $7,306
- Exempt L/T Gains: $80,000 - $64,200 = $15,800
- Taxable L/Y: $25,000 - $15,800 = $9,200
- 15 % tax on $9,200 = $1,380
- Line 16 of 1040: $7,306 + $1,380 = $8,686
@Matthew0304
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