Long Term Capital Gains Tax Hitting me for Well over 15% - Why and How?

[Grubster]

So I calculated my taxes in Turbo Tax without Keying in My Stock Sales.  It showed I would have a refund of approximately $2,000 Federal.  I then added in my stock sale and was expecting it to reduce my refund by exactly 15% of the profit from the stock sale (long term gains).  Instead, it added an additional $3,000+ more than I expected to the amount I now owe.  I was under the impression capital gains does not effect your ordinary income tax bracket, so I am a bit confused how this can happen.  What other impacts does Capital gains have on your taxes.  I thought it was Just simply Profit x 15%.  FYI, i'm in the 22% income bracket and this is all long term gains.  

[snowmman]

Doesn't sound like you're in the 20% LT gains bracket.

So maybe AMT? You should be able to see whether you're getting AMT in turbotax?

What triggers the AMT for tax years 2018 to 2025?

These are some of the most likely situations:

• Having a high household income. If your household income is over the phase-out thresholds ($1,047,200 for married filing jointly and $523,600 for everyone else), and you have a significant amount of itemized deductions, the AMT could still affect you.
• Realizing a large capital gain. Long-term gains (e.g., profits from selling a home or other investments) are taxed at the same rate under both systems, but capital gains could put you over the AMT exemption threshold. That could cause the AMT to kick in, which means you may not be able to deduct state income taxes you paid.
• Exercising stock options. Normally, exercising qualified employee stock options (also called incentive stock options or ISOs) to buy stock at a discounted price isn't a taxable event until you sell the shares for a profit. The AMT, however, creates a paper profit that’s taxable even though you won't receive the actual profit until you sell the shares.
  
  from https://www.schwab.com/resource-center/insights/content/amt-triggers

[Grubster]

Where would I look to see if the AMT is impacting me. I am in the 22% tax bracket married filing jointly, and the Capital gain income was around ~$50k.  Total Income Married Filing Jointly is around $200k which includes the capital gains.  So not sure what AMT Trigger is defined as a Large capital gain. 

[SteamTrain]

Also...other things to consider in addition to the AMT

You are only looking at the refund meter

1)  IF you are retired and receiving SS income, the extra income may be making more of your SS income being subject to taxes.

2)  Sometimes the extra income increases yoru AGI to a point that certain other credits are reduced.

The only way to know what exactly is happening is to get a full PDF copy of your tax file (with all the calculation worksheets)  both before, then after the stock transactions are put in, then go over it all line-by-line.

__________________

Oh...

3)  IF you imported your stock sales, make sure the basis is reported properly for each.  Especially for non-covered long-term sales...for some non-covered sales, their "basis" may not be part of the import file, or coming in as a zero, and falsely increasing your gain.

[snowmman]

you may be able to get a better response, and the other poster is right on, about maybe taxes got increased by some other reason, so you really have to look at all your forms to understand.

but for just understanding your amt, I suppose you could switch to "View Forms" rather than "Step by Step" and then look for whether there's a Form 6251 in the list of forms Turbotax did for you. Form 6251 is AMT calculation.

You might also look through whether do AMT calcs in the step by step, instead of "view forms".

[snowmman]

Also, with the additional info you provided, it's possible that you get hit with the addition Net Investment Income Tax.   which is an additional 3.8% tax on investment income, including capital gains..depends on your MAGI.

Net Investment Income Tax

In addition to regular capital gains tax, some taxpayers are subject to the net investment income (NII) tax. It imposes an additional 3.8% tax on your investment income, including your capital gains, if your modified adjusted gross income (MAGI) is greater than:

• $250,000 if married filing jointly or a qualifying widow(er) with a child
• $200,000 if single or a head of household
• $125,000 if married filing separately
  
  
  see here https://www.investopedia.com/terms/n/netinvestmentincome.asp

[Mike9241]

if your investment income is high enough you pay an additional 3.8% Net Investment Income Tax form 8960 9Which transfers to schedule 2 line 12. AMT is also a separate tax that flows to schedule 2 line 1. if these aren't in your return look at the qualified dividend and capital gain worksheet to see your tax computation. 

enough capital gains and you can push other income into a higher tax bracket

[Grubster]

Thanks everyone!  The one thing I found, is it seems it phased me out of some Child Tax Exemptions as I was toggling back and forth that does make a difference. I'm going to probably call my accountant as well to help review this thanks!

[Grubster]

So, I figured out about the Forms view, never used that before, that was very helpful.  There is both a Form 6251 and 6251 Wks.  Looking through there it does a lot of calculations.  Is there a line item I'm looking for to determine if it did actually calculate a AMT to use?  It completed Part 1, 2 and 3 of form 6251.  It appears this might be the culprit, but I'm not understanding why.  

Now I switched back to Normal Turbo tax view, went to section called "Other Tax Situations" Selected Alternative Minimum Tax, and it shows a Tentative Minimum, which is Less than Regular Tax, and shows Alternative Minimum Tax as $0.00. So it appears I am not being hit with extra AMT, or higher payment. 

[RaifH]

If you were paying the AMT, it would show up on Form 6251, line 11. It would also show up on Schedule 2, Line 1. 

As you have discovered, the increase in tax is not solely due to the capital gains on your stock sales. Also by having a larger gross income, it has begun to phase out or eliminate your child tax credit. This may be the case with other credits as well as many of them do have an amount where they are phased out or eliminated.