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philt
Returning Member

Tax rate confusion

On my filed return, it appears that my capital gains have been taxed at my bracket rate (22%) and not the 15% rate that I expected. Have I missed a step in filing my return? How is the cap gains rate actually applied during filing.? My net long term gain is listed along with all other taxable income on page 1 of my return?

1 Best answer

Accepted Solutions
DianeW777
Expert Alumni

Tax rate confusion

When you are looking at your tax return, be sure to review the Qualified Dividends and Capital Gains Worksheet. You can also see the blank worksheet in the 1040 instructions, page 36.  This will show you how the rates change as the complete tax is computed with the special rates.

 

Your capital gains, for those transactions that are considered held long term, are taxed at different rates determined by income level and depending on your personal income tax rate.

  • Long term is a holding period of more than one year and receives capital gain tax treatment (0%, 10%, 15%, 20% depending on your regular rate of tax)
  • Short term is a holding period of one year or less and receives ordinary gain tax treatment (your regular rate)

2020 Income tax rates and income levels by filing status can be found using the link below.

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5 Replies
MinhT1
Expert Alumni

Tax rate confusion

Although all your capital gains (long term and short term) are listed as a lump sum on page 1 of your form 1040, TurboTax will apply different tax rates when calculating your tax liability.

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philt
Returning Member

Tax rate confusion

That's not really a satisfactory answer. The process needs to be transparent and I should be able to see the breakout. The mechanics have to be described somewhere. I see no supplementary worksheets or forms in my return. If I were filing manually, how would it work? Haven't been able to suss it out at IRS.gov...

DianeW777
Expert Alumni

Tax rate confusion

When you are looking at your tax return, be sure to review the Qualified Dividends and Capital Gains Worksheet. You can also see the blank worksheet in the 1040 instructions, page 36.  This will show you how the rates change as the complete tax is computed with the special rates.

 

Your capital gains, for those transactions that are considered held long term, are taxed at different rates determined by income level and depending on your personal income tax rate.

  • Long term is a holding period of more than one year and receives capital gain tax treatment (0%, 10%, 15%, 20% depending on your regular rate of tax)
  • Short term is a holding period of one year or less and receives ordinary gain tax treatment (your regular rate)

2020 Income tax rates and income levels by filing status can be found using the link below.

View solution in original post

philt
Returning Member

Tax rate confusion

Was just walking through that convoluted beast of a worksheet. It's odd that TT doesn't include that worksheet in the return .pdf. It would be helpful to see the application of the logic. Back in the day when you actually had to read through the 1040 instructions and work through the steps, it might have been more obvious. While TT takes much of this work out of the equation, it would be helpful to see an explanation like "$X of your income was taxed at the Y% capital gains rate, etc..." or how about inclusion of the worksheet in the .pdf package.

DianeW777
Expert Alumni

Tax rate confusion

I believe you should be able to print that worksheet when you physically print or create a .pdf of your return.  It is definitely part of the TurboTax CD/Download version of the return.

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