Long-term capital gain not taxed at 15%?

[PMac10000]

In 2023 I sold some stock, with the long-term capital gain totaling about $25K.  All cost-basis data was imported directly from the institution into Turbotax, and looks correct.

However, when these values are entered into Schedule D lines 8b and 9 (totaling about $25K) my tax owed increases by about $6K.  This is far more than than the ~ $3.7K I would expect at 15%.   When I override the 8b and 9 lines to $0, the tax owed decreases by $6K... somewhere around 24%.

Does anyone know what might be happening here?

[dmertz]

Is the $25k increase in your income increasing the taxable amount of Social Security benefits?

Is the increase in your AGI causing the reduction of some deduction or tax credit?

[PMac10000]

The increase in AGI is not putting us (MFJ) into the 20% bracket, which I believe starts at $533K.  I am not receiving any SS benefits, if that's what you mean.

[baldietax]

Go to Forms or do an export of the return to PDF with all supporting worksheets and see what is happening on the "Qualified Dividends and Capital Gain Tax Worksheet" that will show you step by step the calculations and why this is triggering a higher than expected rate.  6/25 = 24% sounds like it's getting the 20% rate plus the 3.8% investment income tax.

[PMac10000]

I can use overrides to zero out the $25K on Schedule D.  After doing so, my total taxes owed (line 25 of the Dividend and Capital Gain Tax Worksheet) reduces by about $3.7K, as would be expected for 15%.  So this checks out.

However, at the same time, TurboTax's real-time "Federal Tax Due" calculation decreases  by $5.9K, which obviously does not match.  In other words,  entering this $25K sale is increasing my taxes owed by $5.9K, even though the worksheet shows it being taxed at 15% ($3.7K)

Any ideas as to why this is happening?

[baldietax]

Ok sounds like you’re paying 15% there but would guess that the additional 25k is affecting your AGI and pushing some other income into a higher tax bracket or triggering the 3.8% investment tax if that wasn’t already in play.  I would check out what changes on the 1040 by adding the 25k and final tax calculation.  Hope this helps.

[PMac10000]

OK, getting a little closer.

When I use the "Tax Summary" feature, and compare "Before "and "After" entering this $25K sale, here are the key differences:

"Total credits" (money they give you back) reduces by $1.25K

"Other taxes" increases by approximately $1K

This accounts for the extra burden on the bottom line.  But why are these things happening?  I will now start looking for how TurboTax defines these two entries.