Capital gains being taxed despite taxable income below $83,350

[duvalte]

My taxable income is well below the married filing jointly threshold of $83,350, which as I understand is the point at which capital gains are taxed at 15%.  But it appears in TurboTax that my capita gains are being taxed at 10%!.  I tested by changing the amount of capital gains, and the federal refund amount changed by 10% of the change I entered.  What am I missing?

[MinhT1]

Long term capital gains are taxed at 0% if your tax bracket is 12% or less (less than $41,675 of taxable income for Single or MFS or less than $83,350 of taxable income for MFJ)..

However, long term capital gains are included in your taxable income for the calculation of your tax bracket, and that part of long term gain which crosses over $41,675 (Single or MFS) or $83,350 (MFJ) is taxed at 15%.

In your case, long-term capital gains when added to your other taxable income bring taxable income above $83,350 and that excess is taxed at 15%.

[duvalte]

Thank you for the quick reply.  I understand that concept, but even with the additional test capital gains that I entered ($1000 sale price, $500 basis, held for 20 years), which kept my taxable income still below $50k, my tax changed by $50 (10%).  It doesn't make sense to me.

[MinhT1]

One possible explanation could be that your increased AGI caused a drop in your Earned Income credit and an increase in tax liability.

[duvalte]

Alas, I don't qualify for the EIC, so that's not what's happening.  😕

[JamesG1]

Your tax return should contain a Qualified Dividends and Capital Gain Tax Worksheet (page 36) or a Schedule D Tax Worksheet (page D-16) to compute your income tax.

Review the worksheet to see how your income tax was computed and how your long-term capital gains were taxed in the calculation.

In the online versions, you may view or print at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets after you have paid for the software.

In the Desktop versions, one can look at the tax return by clicking FORMS, or by viewing the PDF through the Print Center.

@duvalte 

[Mike9241]

with more income, certain deductions and/or credits could have been reduced. the only way to tell is to look at every line on your 1040, and schedules 1,2, and 3 b/4 adding that capital gain and then after to see what changed. 

[duvalte]

Thanks. I'll take a look.

[duvalte1]

I compared the 1040s before and after entering the "fake" capital gains, and I see that the difference is in how much of my social security income is taxed.  That had never crossed my mind - I guess I had thought that all of it was taxed.  Thanks for all the suggestions!