When I include a long-term collectible I sold, it makes my tax due at the ~35% tax, which is similar to my regular income. Why isn't it taxed at the max 28% rate?

[taxtaxbax]

I have a fairly high income at ~$200k annually. I sold a high dollar collectible for ~$150k.

My withholding is setup correctly for my income, making my tax due ~$0.

When I include the collectible and check the “collectible” box, it makes my tax due ~$54k at ~35% tax, which is similar to my regular income. I thought collectibles were taxed at the max 28% rate. Any idea why it would be taxed at a level similar to my regular income? Collectable was held for around 3 years.

[JamesG1]

Does your tax return include a: 

• Schedule D Tax Worksheet (see here page D16) or 
• Qualified Dividends and Capital Gains Worksheet (see here page 36)?

Which sheet do you find?  On that sheet, are you able to find where your collectible was taxed?

[taxtaxbax]

Yes. On line 47 of the Schedule D worksheet there is a total of $84k for tax on taxable income. My withholding is $37k, so I would expect a tax due of $47k, but TurboTax is calculating it as $54k due. The only things entered are the W-2 and the collectible gain.

[taxtaxbax · Accepted solution]

I found the delta.

It is Net Investment Income Tax (NIIT) at 3.8%. Never knew that existed. Ugh.

[DawnC]

The net investment income tax (NIIT) is a 3.8-percent tax on the smaller of your net investment income or modified adjusted gross income.  The tax only applies if you report net investment income; your wages and self-employment earnings, by themselves, have no impact on the NIIT.

[DawnC]

The net investment income tax (NIIT) is a 3.8-percent tax on the smaller of your net investment income or modified adjusted gross income.  The tax only applies if you report net investment income; your wages and self-employment earnings, by themselves, have no impact on the NIIT.