I understand that LTCG is added to regular income to determine its bracket, and taxed appropriately. But I expected to see the 12k deduction subtracted from the regular income, and then taxed as income tax. The summary shows the LTCG added to regular income, the deduction subtracted, and that total as taxed at the blended tax rate. How do I force Turbo Tax to interpret the stock sales as long term? Is it the "uncovered security" status that's screwing this up? Would it behave differently if it were type D "covered"?
Even though the full amount shows up as income on the 1040 as income, if you have capital gains or qualified dividends the tax on line 11 is not taken from the tax table but is calculated separately from schedule D. The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet. It does not get filed with your return. In the online version you need to save your return as a pdf file and include all worksheets to see it.
For the Desktop version you can switch to Forms Mode and open the worksheet to see it. Click Forms in the upper right (upper left for Mac) and look through the list and open the Qualified Dividends and Capital Gain Tax Worksheet.
Thank you, that's what I hoped to hear. I have to say though, the summary view makes this very confusing. Especially because the standard 12k deduction is shown subtracted from the Income + LT gains, with the result being the total taxable income, and the two very different rates collectively termed the "blended tax rate". That in itself would be decodable for me, were it not that I also withdrew early from a 401k, and incurred a penalty fee, and now it seems that fee is also being included in the calculated tax rate, which without the fee would be way too high and make no sense. As an engineer and UI designer myself, I gotta say that part needs work though I appreciate the attempt at simplicity.