Turbo Tax Premium computation of tax on a 1040-SA form of the 1099-S entry for a DVC contract sale.

[higginsme]

I believe that the Turbo Tax Premium tax computation for a 1099-S entry is in error, especially on the "Qualified Dividends and Capital Gain Tax Worksheet.

I entered the 1099-S capital gain of sale of a DVC contract as an entry to Turbo Tax Premium.   Turbo Tax  then entered this on my 1040 -SR form line 7.  Thus it was added to my other on line 16.Taxable income.  I have no problem so far.  But now Turbo Tax then computes the Taxable Income on form 1040-SR line 16.  Schedule D is filled out as well form 8949 "Sale of Other Dispositions of Capital Assets" by Turbo Tax.

The rules for Capital Gains use a different tax rate table to compute the total taxes on the income and the capital gains.

The computation of the tax is done on form "Qualified Dividends and Capital Gain Tax Worksheet". this computation should report that since my taxable income is ( $61,000 and should not include the reported 1099-S gain of $1,400 ) is substantially below the IRS listed tax rate limit of $89,250  I have no taxes on that 1099-S entry.  But I see that Turbo Tax computes a slightly higher tax amount. I do believe that this computation is correct. Since I have a 1099-S also then the IRS has a copy also.  IRS regulations require that I must report the gain on Schedule D.  But because the tax rate limi says I do not exceed the limit therefore I have no gain to incrase my tax amount.

I ask others if I am wrong but I am not sure it is Turbo Tax or the IRS.

[ThomasM125]

I think you mean to say that TurboTax is showing some tax on the property sale, but it should not since you are below the income threshold for tax on capital gains. One possibility is that there was depreciation recapture associated with the sale, and that is not considered capital gain income, it is taxable as ordinary income. For instance, if the profit on the sale was $50,000, just as an example, but you sold an asset that had $5,000 of accumulated depreciation on it, the capital gain would be $45,000 and $5,000 would be taxable at ordinary tax rates, up to a maximum of 25% in most instances. 

[higginsme]

I have reevaluated my previous post regarding TTAX Premium. Premium does correctly compute the tax on a DVC contract sale.  I followed Premium recommendation to call the 1099-S transaction as a "Sale of second home".

Since my Taxable Income (after Standard Deduction subtraction was taken ) was below $89250 (where the Capital Gains Tax on my DVC sale after deductions for the sale is instructed by IRS to be $0.00).  TTax Premium correctly computed the Tax for me as $0.00 on the "Qualified Deduction and Tax computation" form. 

I then added in my 2023 standard income and deductions and the total combined Tax rate and Capital gains Rate tax in TTAX Premium correctly uses the Standard approved IRS Tax Rates and the Capital Gains was also correctly computed to be $0.00 for my return.

Sorry to anyone about the confusion the post may have caused.  My slamming all those numbers to TTAX confused me as to how the Tax was computed.  The worksheet to compute the tax and Qualified Capital Gains is a bit detailed but I verified that it is correct.