I have issue with TurboTax calculation of my taxable Social Security. I am full age retired and I sold some stock in 2022 with capital gains. I mailed my return (cannot e-file), and paid the amount I still owed for Federal taxes. THEN I received a REFUND check from the IRS. I thought it was fake, but IRS says it is real and I overpaid my taxes! TurboTax rep reviewed my TT filing and says it is correctly done. Says IRS making mistake because IRS did not add capital gains to my income to calculate taxable Social Security. He advised me to call IRS after 4/18/23 to ask them why!
I found the following on Internet. Anybody have similar experience??? If IRS is correct, I also need to refile my State tax which will go down
....Capital gains and Social Security benefit taxes have a circular relationship. If your capital gains and income from other sources is low enough, your Social Security benefits may not be taxable. That, in turn, lowers your taxable income and can decrease the tax rate you pay on capital gains. On the other hand, large capital gains can cause your Social Security benefits to become taxable, which also may increase the amount you'll have to pay the
@vicmn , that second paragraph is correct except that this is not just capital gain/ loss that affects the taxable portion/ amount of SSA - it is 1/2 of Social Security Benefit(s) plus all other income(s) compared to a threshold to determine the taxable portion. And you are right also that the capital gain tax rate is also based on gain compared active/ other income( s) for selecting 0%, 15% , etc. rate of taxation of the gain.
There is a worksheet ( go to forms mode ) which computes the taxable portion of the SSA benefits.