I was charged $454 capital gain tax even though I carried into 2024 tax year more than $200,000 in losses. I took the $3000 loss, but the $454 never got offsite.

[dr-nizami68]

Just to add, I was charged $454 2024 capital tax gain and it was charged as additional tax, it never got deducted. It should have zero'd out first

[rjs]

There is no separate capital gain tax. The income tax on capital gain is included in the total tax on Form 1040 line 16. Where exactly do you see $454 - on what form and what line of the form?

If you have -$3,000 on Form 1040 line 7, then you have a net capital loss and you are not paying tax on any capital gain.

[VolvoGirl]

Where are you seeing this additional tax?   Did you get any 1099R forms?  It maybe the 10% Early Withdrawal Penalty or excess accumulation penalty for not taking enough amount out for the RMD or contributing more than you are eligible for a IRA or 401K.   

[dr-nizami68]

Let me make a correction, the amount is $339 and it appears on Line 12 as "net investment income tax". It's coming from line 17 on form 8960. This is tax owed on profit made in 2024. I thought because I carryover a very large loss from previous years, this amount would zero out and not get added as other tax on line 12. It appears it is a mistake in the system as it should have zero'd out.

[rjs]

Net Investment income for Form 8960 includes other things besides capital gain. It includes interest, dividends, annuities, royalties, and rents. None of those are canceled out by capital losses.

[Opus 17]

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@dr-nizami68 wrote:

Let me make a correction, the amount is $339 and it appears on Line 12 as "net investment income tax". It's coming from line 17 on form 8960. This is tax owed on profit made in 2024. I thought because I carryover a very large loss from previous years, this amount would zero out and not get added as other tax on line 12. It appears it is a mistake in the system as it should have zero'd out.

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"Net Investment Tax" is something different.   It was created to help pay for Obamacare and expansion of Medicaid.  It's 3.8% of investments over a certain amount, and can even be applied to all your income once you pass a certain threshold--this is why the top US income tax rate is really 40.8% even though the official top bracket is 37%.  You owe the NET even if your capital gains are otherwise covered by prior losses.

https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-8960-net-investment-income-t...

[rjs]

Although the Net Investment Income Tax (NIIT) was created by the Affordable Care Act, it is not, and never was, earmarked for Obamacare, Medicaid, or Medicare. It goes into the federal government's general funds, just like the regular income tax.

[Opus 17]

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@rjs wrote:

Although the Net Investment Income Tax (NIIT) was created by the Affordable Care Act, it is not, and never was, earmarked for Obamacare, Medicaid, or Medicare. It goes into the federal government's general funds, just like the regular income tax.

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Of course, but it was part of finding the money to pay the cost of ObamaCare.  It was passed by the "reconciliation" process, which as I understand it, is supposed to be revenue-neutral, at least on paper.  To add costs for something else, the bill in question either needs to cut an equal cost somewhere else, or raise an equal amount of new revenue.  

[Hi Palms]

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@Opus 17 wrote:

You owe the NET even if your capital gains are otherwise covered by prior losses.

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That would not be true unless the taxpayer had other investment income mentioned by rjs, such as interest, dividends, rental income, etc. 

Without more, if capital losses equal or exceed capital gain there could be no NIIT on the gain since it is entiely offset by capital losses.