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Tax rate question

sean99 — Sun, 16 Mar 2025 23:08:30 GMT

I have a question about the tax rate. The highest 2024 Federal Income Tax Brackets and Rates is 37% and for California state is 13%. Now I have a stock transaction shows a short term gain of $5000. After I entered this transaction - proceed, cost basis and gain of $5000 (calculated by TT). My federal due increased by $2000 and state due increased by $700. These reflect 40% of federal and 14% of state tax. Did I miss anything?

Re: Tax rate question

VolvoGirl — Sun, 16 Mar 2025 23:20:15 GMT

When you enter one taxable transaction, you can't just watch the monitor. You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A. And by increasing your AGI it might reduce some credits you were getting like EIC. And can make more of any Social Security taxable.

You would have to compare both returns line by line before and after you entered the income to see all the changes.

Re: Tax rate question

Mike9241 — Mon, 17 Mar 2025 01:23:06 GMT

the federal 40% may be due to the Net Investment Income Tax which is an additional 3.* tax on investment income (Form 8960). Another possibility is that adding income affects other items on your returns. The only way to tell is to view your returns before and after line for line.