Why are they taxing my long term capital gains as income? When I enter into TT my tax liability goes up, but my AGI is about 60,000 so my tax rate should be 0 on LTCG

[SteamTrain]

Those $$ do add to your AGI in line 15 of the 1040..

BUT...a special tax calculation form is  used to calculate the tax....usually the "Qualified Dividends and Capital Gain Tax Worksheet"

...that worksheet breaks out the Cap Gains and Qual Divs from you AGI for the special treatment it is supposed to get.

_________

In some circumstances a Schedule D Tax worksheet is used.....but I don't know what triggers that one.

[hickey_jack]

Thank you for the prompt reply, I appreciate it.  I understand your point about the calculations on the worksheet and it appears to be calculated correctly on the worksheet but as soon as I enter it in TT my tax liability goes up and based on my AGI my capital gains tax rate should be 0%

[SteamTrain · Accepted solution]

Could be that something else is affected.

Like those getting Social Security income....the % of their SS that is taxed will increase with higher AGI (any source) until it hits the limit of 85% being taxed.

Or perhaps some other credit is being limited/reduced based on AGI

[hickey_jack]

Yes StreamTrain, you nailed it!  I was being presumptuous and just assuming that TT was taxing my LTCG even though I could see on the return that it was not, but on the screen where I was entering the LTCG it was reducing my refund.  Turns out it was because my AGI was decreasing my EIC.

Thank you for the help!

Jack

[SteamTrain]

...sheesh, I hadn't even thought about EIC specifically.....jsut a generic possible "Other Credits"

[scapjm]

Something else is going on and I can't figure it out. My taxes were all done except for a long term gain (almost 20 years) for which I just received the 1099B. With or without the gain, tax bracket for married filing jointly was not changed.... still under 94k. about 84k without, and 92k with.

yet as soon as I entered it into turbotax, my federal tax increased (refund went down) .... Schedule D shows it on the bottom part, long term.

I can't figure out why the tax liability would go up. 

[DoninGA]

The capital gains were added to your other income.  This is reported on your Form 1040 Line 7

[scapjm]

1040 line 7 says Capital gain or loss  - schedule D required and it does say the capital gain amount.

And that number is included in the sum of total income on lines 9 and 11.

Line 14 has our standard deduction and then line 15 is the "taxable income"; the difference of the total income and the standard deduction.

So the "taxable income" , Line 15 and  including the capital gain, is still under 93k . The threshold for us is 94,050 for capital gain tax. The capital gain, therefore has 0% tax liability but the overall fed income tax liability went up as soon as I entered the 1099B.  the amount is an inexplicable amount.... it's not enough to be taxed at either our bracket's regular tax no the capital gain tax.

[DoninGA]

You are Not paying a capital gains tax.  You are being taxed on your taxable income on Line 15.

The taxes on Line 15 are from the tax tables in the Form 1040 instructions,  The table for taxable amounts $84,000 thru $92,000 is shown on Line 74 of the Form 1040 Instructions - https://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=74

[VolvoGirl]

@scapjm   Did you figure it out?

When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

By increasing your income you might have lost some credits and deductions like the EIC.

Even though the Capital Gains is taxed at a different rate it still increases your income and AGI so you might be losing some of your credits or deductions, like the EIC or the limit on Medical deductions (only over 7.5% of your AGI).

[scapjm]

Thank you, 

while you were responding, I had downloaded the complete tax tables and my tax amount is consistent with line 15 LESS the capital gain. So I looked up the tax on the total amount and subtracted the tax on the smaller taxable income (which is not what it says is the "taxable " income...  and the amount I get for the difference, I divided by the capital gain and it comes out to 12%...

So the TAX then is correct ..... BUT it's not showing anywhere the lesser amount as taxable....

But the tax then would be the exact same as if I did not have the gain. so why did it change as soon as I entered the 1099B?

[scapjm]

Thanks again, we have no credits, no EIC or anything else, we take the standard deduction.... BUT we did have a approximate 1400 capital loss deduction... ... But I still don't get it? we'd have that with or without the addition of the stock gain....  OR would that be it? 

If that explains why the tax changed, then I still don't see where in any worksheet, the amount of net gain is deducted from the calculation of tax . The tax IS consistent with the capital gain NOT counting but where does it show that?

Sorry, I'm a nut! 50 years ago, when I got my first job, my dad sat me at the dining room table with forms all over the place... as he'd done for years, and I would do until TT came along... so I like to see where the numbers are:)

[scapjm]

DUH ME!!!! thanks for reminding me how taxable income could increase....

Lightbulb : so the capital loss of 1400 was coming of regular income  but when I put in the stock gain, it was shifted to reduce the capital gain rather than the regular taxable income.

So that explains why the number in TT changed up in the left corner...

But still, I don't see anywhere the ACTUAL amount on which the tax calculates to the tax table lesser income amount tax. 

[scapjm]

Aaand  I found where the documentation of the lower tax due to capital gain is... It's on the Qualified Dividends and Capital gains worksheet... one the bottom most on the "forms" list. 

Phew, got it all now.

Sorry for all this but thanks for listening and providing some insights .... I hope our musings are helpful to other taxpayers.

Ciao!