I'm adding income from stocks (RSU) that I held for a long-time (> 2 years). I label them as "long-term basis not reported to the IRS" (as indicated on the 1099-B), I add both the cost basis and the proceeds.
I just entered a sale of stocks that way that I held for over 2 years and I gained $906. TT's estimate of my federal taxes increased by $348 after submitting. This is equivalent to a 38% tax rate and not the expected 20%.
What am I doing wrong or why does TT think I owe 38% on long-term gains?
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one more observation: if I switch the the description of the stock sale from long-term to short-term the federal tax estimate in TT doesn't change. That doesn't seem right ...?
The tax rate on most net capital gain is no higher than 15% for most individuals. Some or all net capital gain may be taxed at 0% if your taxable income is less than $78,750.
A capital gain rate of 15% applies if your taxable income is $78,750 or more but less than $434,550 for single; $488,850 for married filing jointly or qualifying widow(er); $461,700 for head of household, or $244,425 for married filing separately.
However, a net capital gain tax rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate.
There are a few other exceptions where capital gains may be taxed at rates greater than 20%:
Note: Net short-term capital gains are subject to taxation as ordinary income at graduated tax rates.
The holding period (long term or short-term) is determined by the dates you enter and not so much the description you chose. So, double check your Schedule D and verify the sales are reported as Long-Term and not Short-Term as short-term gains are taxed at your ordinary rates which could be up to 37%.
How to Report RSUs or Stock Grants on Your Tax Return
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