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tinytim12345
Returning Member

Why no taxes due despite having a taxable income?

I've been using TurboTax Delux 2019 download version and have entered my interest, dividends, and sales of stocks information.   I haven't entered my salary information yet.  The taxable income (Form 1040 Line 11b) is ~$8000, but TurboTax calculates the tax (Line 12a) as zero.  Is this a bug?

6 Replies
Bsch4477
Level 15

Why no taxes due despite having a taxable income?

If you are filing single your standard deduction is $12,200 so at $8,000 you have not yet exceeded that level. 

tinytim12345
Returning Member

Why no taxes due despite having a taxable income?

The total income is ~$20,000 and the $12,200 has already been applied.  I've clearly said in my post that there's $8000 of taxable income.  In other words, there should be tax based on this $8000, but I'm not seeing it show up on TurboTax.

JosephF8
Expert Alumni

Why no taxes due despite having a taxable income?

Yes, but if that income is attributed to Long Term Capital Gain the tax rate for that income level is 0. You may end up with enough income that some of your Capital Gains are taxed. Just not yet. 

 

The tax rate on most net capital gain is no higher than 15% for most individuals. Some or all net capital gain may be taxed at 0% if your taxable income is less than $78,750.

A capital gain rate of 15% applies if your taxable income is $78,750 or more but less than $434,550 for single; $488,850 for married filing jointly or qualifying widow(er); $461,700 for head of household, or $244,425 for married filing separately.

However, a net capital gain tax rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate.

There are a few other exceptions where capital gains may be taxed at rates greater than 20%:

  1. The taxable part of a gain from selling section 1202 qualified small business stock is taxed at a maximum 28% rate.
  2. Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate.
  3. The portion of any unrecaptured section 1250 gain from selling section 1250 real property is taxed at a maximum 25% rate.

Note: Net short-term capital gains are subject to taxation as ordinary income at graduated tax rates.

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levydbo
Level 2

Why no taxes due despite having a taxable income?

I have no taxes due on taxable income of $37,892 of income.  My Total income is $81,309 which comes entirely from dividends and interest.  My allowed deductions are $43,417, of which $10,339 is the allowed deduction from medical expenses (that portion over 7.5% of AGI).  I called turbo tax and she said that there was no tax because the income was not earned income, however, I don't understand this as dividends and interest are calculated at the income rate (unlike capital gains).  Can someone give me some feedback?

Bsch4477
Level 15

Why no taxes due despite having a taxable income?

For 2020, individual filers won't pay any capital gains tax if their total taxable income is $40,000 or below.

VolvoGirl
Level 15

Why no taxes due despite having a taxable income?

To clear this up, as answered on another post, some or all of your dividends may have been Qualified Dividends and get taxed as capital gains.

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