Long Term Capital Gains is being taxed, when I am in the 0% tax bracket, why?

[CKK1]

My mutual fund reported $6.6K of Total Capital Gains in Box 2a of there 1099-DIV. TurboTax has placed that exact amount in Box 6 of my Form1040 and I'm being taxed on it. But shouldn't it be 0% tax because my taxable income (filed as Married Jointly) is only $64K, this is well under the $78,750 trigger point when CG gets taxed. Why am I being taxed on the Capital Gains as ordinary income?

[DanaB27 · Accepted solution]

Yes, you are correct your long-term capital gains will taxed at 0% in your income bracket. The capital gains will be included in your taxable income but the Qualified Dividends and Capital Gain Tax Worksheet is used to calculate the tax. When you look at the worksheet you will see that the long-term capital gain was taxed at 0%.

In the preview of Form 1040 you can verify how your tax was calculated:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left
5. Scroll down to "Tax Smart Worksheet" the "Qualified Dividends and Capital Gain Tax Worksheet" should be checked

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@CKK1  comment above deleted.

[allenstrong]

Same thing happened to me.  My tax liability went up when I entered in the long-term capital gains.  When I investigated (Federal Review tab/ 2024 tax breakdown) I discovered that the increased tax liability was for my Affortable Care Act premium increase.  Affortable Care Act premiums are based on MAGI which includes capital gains income.  In other words, the capital gains income lowered my health insurance premium tax credit...hence more tax liability.  Hope this helps.