Short-term & long-term capital gain added together to line 13 in form 1040. Then how can they taxed at different rate?

[MinhT · Accepted solution]

Although both long-term and short-term capital gains are added together on line 6 of form 1040, TurboTax will correctly calculate taxes based on amounts reported on Schedule D, where long-term and short-term capital gains are reported separately.

Edited 03/09/2020  |  1:08 PM PST

[tonyo]

Hi MinhT, if short and long term capital gains are added together and TurboTax will correctly calculate taxes based on the amounts reported on Schedule D, why is the total amount (STCG&LTCG) added to the total income and tax bracket is applied on line 10 of 1040?  Where is the adjustment being made?

[Anonymous_]

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@tonyo wrote:

...Where is the adjustment being made?

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Are you referring to the 2018 Form 1040? Regardless, the calculation is made on the Qualified Dividends and Capital Gain Tax Worksheet.

See https://apps.irs.gov/app/vita/content/globalmedia/capital_gain_tax_worksheet_1040i.pdf

[dave3100]

There is a schedule D tax worksheet that computes your tax. In Turbo Tax 2019 go to view / forms and select the form "Schedule D Tax".  This worksheet calculates your tax including short and long term capital gains and then enters the result on line 12a 1040

[aphilip1]

In 2018 form , you added both short term and long term capital gains and them moved that amount to 1040 . But in 2019 you did it correctly

[aphilip1]

In 2018 tax forms , after adding long and short term capital gains and then they added that to my income and calculated the tax

[Critter-3]

Save a PDF of your 2018 return so you can see the QDCGT worksheet ... that is where the different tax rates are calculated ...  

How do I get a copy of a return I filed this year ...

[mother2002chang]

Hi,  I am preparing 2025 tax using turbotax Premium.  I ran into the same question. 

Shcedule D line #7 is for short term capital gain.

Schedule D line #15 is for long term capital gain. 

Schedule D line #16 is for the sum of line #7 short term capital gain and line #15 long term capital gain.  Then it moves the sum on line #16 to form 1040 line 7a.

I don't see where it calculates different rate for short term and long term gain.

Please tell which form I can find turboTax using different tax rate for short term and long term capital gain.

Thanks,

Judy

[mother2002chang]

Hi,

I am sorry to say Schedule D only transfers long or short term capital gain from our 1099, "not calculates". Then turboTax transfers the sum of long and short term gain to form 1040 as regular income.  Our long term gain should not be in the regular income section to be taxed as regular income tax higher rate.

Thanks,

Judy

[DawnC]

Your net capital gain/loss is calculated by subtracting your capital losses from your capital gains (Schedule D). If you have a net capital loss, you can deduct up to $3,000 ($1,500 if Married Filing Separately) per year as a capital loss.  If your net capital loss is more than the yearly limit, you can carry the loss to next year's return as a capital loss carryover.

You have to look at your Qualified Dividends and Capital Gain Tax Worksheet (and maybe the Schedule D worksheet if you have collectibles or contracts) which is included with your return to see how the tax was calculated.    If you look at that worksheet, you’ll see that the calculation does separate long term and short term sales:

1. It subtracts your LTCG from your total taxable income.
2. It calculates the tax on your "Ordinary Income" using standard brackets.
3. It calculates the tax on your "Long-Term Capital Gains" using the lower preferential rates.
4. It adds those two tax amounts together and this amount gets placed on Form 1040, Line 16.