Refund and Capital Gains

Forum|Forum|3 years ago
January 30, 2023
5 replies
16 views

Hello my wife and I have about 90K in W2 income. She acquired stocks from her grandmother which my wife sold and had around 8500 in capital gains. When the investment advisor talked to her in April the Investment Advisor said she would be paying around 1000 in Federal Taxes. As I was doing the turbotax forms and inputting all the information in I see that "Tax on this income is included in your total tax due of 0? This amount may change as you work on your return". So why are we not taxed on this capital gain then?

Bsch4477

Level 15

Are you through entering all of your income? As the program said, your tax may change as you go on.

GeorgeM777

Level 11

You will pay tax on the capital gains; however, if your return has not be completed in full, your final tax due amount may not be reflected in the information you currently have available. Do you have any capital losses? Capital losses will offset the capital gains.

Moreover, if your spouse inherited the stocks, then your spouse gets a "stepped up basis." Let us know if the stocks in question were inherited as a stepped up basis would apply in that situation. A stepped up basis could result in a smaller capital gain.

@Matt 126

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Matt 126Author

Level 4

Hi no its still no impact. I finished all the way. It is because of our joint filing standard deduction of 25900?

Opus 17

Level 15

@Matt 126 wrote:

Hi no its still no impact. I finished all the way. It is because of our joint filing standard deduction of 25900?

If your regular income is in the 10% or 12% bracket, long term capital gains have zero tax. Once you move up to the 22% tax bracket, long term gains are taxed at 15%.

For a married couple filing jointly, the 12% bracket ends at $83,550 of taxable income. When you add the standard deduction of $25,900, that means that first $109,450 of gross income is taxed at 12% or less, so you are in the zero bracket for long term capital gains. With an income of $98K plus 8.5K of capital gains minus the standard deduction, your long term capital gains are tax-free.

If you added more income, so that your total income (including the capital gains) was more than $109,450, you would start to see 15% tax on part or all of the gain.

Matt 126Author

Level 4

I did however jump from no refund or payment to a 300 payment that we owe in state tax that I failed to mention

Matt 126Author

Level 4

Total income with w2s and 1099 B

98587

-25900

=72687

x 9.8%

tax liability is 7,146

taxes paid 8260.00

fed refund 1114.00

Matt 126Author

Level 4

@GeorgeM777

Mike9241

Level 15

if your entire income consisted of $90K in wages and $8.5K in long-term capital gains even using the standard deduction that $8.5 is taxed a zero percent. gain/loss from sale of inherited property is automatically long-term but you must indicate in Turbotax it's inherited from the date acquired box drop down options. when you are done entering all your data look at the qualified div and capital gain worksheet

line 9 shows amount taxed at zero

line 17 the amount taxed at 15%

line 20 amount taxed at 20%

your advisor was only estimating

Mike9241