Parent's Capital Gains are not calculated properly in Form 8615?

[HazTaxQuestion]

I need to fill out a Form 8615 due to my unearned income and being claimed as a dependent. In TurboTax when prompted, I entered my parent's Taxable Income from their 1040 (Line 15) and also their Capital Gains income from their Schedule D Line 15.

Most of my parent's income came from capital gains which were below the tax threshold. Therefore their actual taxable income was quite low.

When I view the Form 8615 it only shows their Taxable Income and I don't see any mention of the Capital Gains. Therefore the value in my Form 8615 Line 8 is much higher than it should be because it seems to consider all of my parent's income as taxable when in reality most of their income was from capital gains and wasn't taxed.

How do I correct this?

[DawnC]

It is correct.  Capital gains that are taxed at 0% are still considered taxable income.   The capital gains are correctly included in the taxable income amount.  

The Kiddie Tax only applies to unearned income in excess of $2,600.

• $0 - $1,300 isn't taxed.
• $1,301 - $2,600 is taxed at the child’s tax rate.
• Over $2,600 is taxed at the parents’ marginal tax rate.   Their marginal tax rate is the highest tax rate they'll pay on taxable income. It’s based on the federal income tax bracket they're in, which depends on their taxable income and filing status.