TurboTax is taxing my long term capital gains at income tax rate instead of my capital gains rate. Why? I purchased date more than 1 year before date of sale

[JotikaT2]

You may need to review your input to make sure you have entered it in the correct section of the program.

Assuming this is from stock sales, you will need to review your input below and ensure that you have classified the gains as being long-term.

You will this information in the federal interview section. 

1. Select Income & Expenses 
2. Scroll down through all income until you see Investment income 
3. Select Stocks, Mutual Funds, Bonds, Other 
4. Select Edit to the right of the applicable sale.  The next page will say Now, we'll enter one sale on your 1099B.
5. On the area titled Sales section, be sure to use the pull down arrow to select long-term gain as reported on your 1099-B. This will ensure your stock sale matches the amounts and classifications as reported on your 1099-B.

[Jiggra]

Thank you. That is exactly what I did and have included cost basis, date acquired which is more than one year before date sold. I've tried deleting the entry and re-adding it several times, and I always get the same result of a much higher tax rate (over 25%) that I owe from this one stock sale.

[AmeliesUncle]

This is from a sale of stock, right?  Not something else (such as real estate)?

Look at Line 16 of your Form 1040, both before and after entering the stock sale.  Does THAT number increase by the 25% rate that you are seeing?  

[Jiggra]

Yes, company stock that I exercised more than 1 year before the stock was cashed out (sold) due to acquisition. I wish I could review the forms on the backend, but TurboTax online doesn't appear to let you do that unless I am missing something. The tax "professional" via Turbotax Premier Live assured me that everything was correct, but was unable to explain why. I initially thought it was because the capital gain may have put me into a higher tax bracket, therefore all of my income was being taxed at a higher level. But my understanding is that capital gain amounts cannot cause your ordinary income to be taxed at a higher bracket rate.

[Jiggra]

Thank you again. I figured out how to Preview my 1040 and other forms via Tax Tools. To answer your question, no, the amount in line 16 does NOT increase by 25%, it appears to be the correct 15% increased amount. It looks like I am losing a tax credit of some sort as a result of the capital gain, which is causing my "Amount owed" to increase by way over the amount of capital gain. Still researching... 

[AmeliesUncle]

Yes, as you are seeing, that 'extra' income can affect other things on your tax return.  Common examples are that some deductions or credits may be reduced, or you are subject to the 3.8% Net Investment Income Tax.

If you look at Lines 17-30 of Form 1040, you should be able to track it down (after seeing what changes, you may need to looked at the numbered Schedules to see what specifically is being changed,  and you will need to pay for your return first to see those numbered Schedules).

[Jo128]

I am having the same problem.  My long term stock holdings that I have sold are being taxed at 22.4% which makes no sense. I am way below the limit for 0% tax rate according to everything I can read online.....

[Vanessa A]

Where are you seeing the stock sales are being taxed at 22.4%?  The 22.4% sounds like an average of tax rates as all of the rates are even numbers.  So, if it was at your ordinary income tax rate it could be 22% but not 22.4%.

Also, if you are single and your taxable income total is over $40,400, then your capital gains rate would be 15% most likely unless your income was over $445,850. 

What are your sources of income and how much income in each category do you have?