Mike9241, you nailed it again.
TurboTax is calculating the tax properly. The issue lies in the Qualified Dividends and Capital Gains Tax Worksheet.
My test case adds $10,000 to the IRA withdrawal -- no Net Investment Tax impact.
The above worksheet separates investment and non-investment income, calculating the tax on each part.
- The non-investment income increase of $10,000 results in $3200 more tax on Line 22 -- a 32% marginal rate
- The tax calculation on the investment income bumps $10,000 from the 15% cap gains rate to $20%, resulting in another 5% tax on the non-investment increase, and thus 32% + 5% = 37%. It is coincidence that 37% is also the top tax bracket.
So, I don't get a 32% bracket - my marginal rate jumps from 24% to 37%. But there may be a higher income level where the marginal rate drops back to 32% or 35%.
