Why are my long-term capital gains being taxed when my total earned income is less than $40,000? Seems like a glitch in Turbotax software!

[DawnC]

Your capital gain amount in on Line 7 of Form 1040.   That number is included in Line 15, which is your taxable income.   The tax amount on Line 16 includes the tax on your taxable social security and interest.    

The lower rates apply to long-term capital gains.  Short-term capital gains are taxed at ordinary income tax rates.  @kpl23 

Capital Gain Rates

[NigelLynn]

My total 22k LTCG was added to our 65k income even though the walk thru said congratulations it was taxed at 0% but changed my amount owed to thousands .. we filing married filing jointly so this met the threshold. So why is it adding to my ordinary income along side our SS checks 

[BrittanyS]

Have you reviewed your capital gains tax worksheet to see how any capital gains or qualified dividends are being calculated?

@NigelLynn 

[Mike9241]

we cant see your return so look at the Qual Dividend and capital gain worlsheet.

in the tax calculation the LTCG does not come first to see if you're over the thresholds it comes last and taxable social security is taken into account before the capital gains

here's an over-simplified example

1) taxable income (line 15 of 1040) less qualified dividends and long-term capital gains

2) 94050

3) smaller of 1 or 2

4) line 2 less line 3  not less than zero. The QD and LTCG taxed at 0%

5) taxable income less line 2 taxed at 15%

a)lets assume taxable income 100,000 so line1 above 78,000

b) smaller of 1 or 2 is 1 or 78,000

c) 94050-78000 =16050 taxeda t zero

d) 100000-94050 = 5950 taxe at 15%

This example shows that the amount of taxable income affects the portion of QD and LTCG that's taxed. Even though, in this example, it was below 47025 a portion gets taxed