Capital Gains tax rate question!

[CPDavis73]

Hello,

I am doing my taxes on Turbo Tax, and I have a quick question that maybe somebody can help me out with.

I am in the 25% tax bracket and lived in Texas all of last year.

I had a long-term gain of $2676.75 - and I entered that into turbo tax from my 1099-B statement.

Prior to entering this information my tax refund was $720 - once I submitted the long-term gain, it then showed that I now owe $50. (taxed $770??)

My question is -- for me being in the 25% tax bracket, shouldn't I only be taxed 15% of the $2676.75?

Please let me know if this is correct!!

Thanks for your help!
Chris

[tranquility]

Generally, yes. However, taxes can't be analyzed in pieces. There are many things which change depending on other things. Do you have Social Security income? Did you take a deduction for an IRA? Many others. I can't tell you the number of times one change affected other things (like itemized deductions). Miscellaneous expenses, medical expenses, whatever.

I can tell you this, you didn't find an error in the program. The program is either right or there is an input error. Turbotax is not perfect, but on calculating tax on capital gains there have been many tests by completed returns to this point.

[FlyingRon]

The number looks like it computed it on ordinary income. Check and make sure you entered the dates or whatever turbotax needs to determine whether it is a long term gain here.

[tranquility]

Computers do math well. While I understand why one would think this is ordinary income (it was my first guess too), it's clear that is not the calculation.

[efflandt]

I always do income taxes on paper forms (or PDF fill-in forms) first before using an online or tax program to make sure everything ends up with the same result. If you properly fill out Schedule D for the long term gain, you figure your tax for 1040 line 44 using the worksheet on p35 of 1040 instructions (unless worksheet on D-10 of D instructions applies). That is where the 15% for long term gains is calculated vs. 25% for your normal bracket, and ends up with lower tax than using tax tables for taxable income on line 43.

But I cannot tell you how/where to enter data into TurboTax, because I have my withholding figured out to owe a little tax and send the check with the PDF forms (the only thing electronic being my calculator).

[LdiJ]

Originally Posted by tranquility

Computers do math well. While I understand why one would think this is ordinary income (it was my first guess too), it's clear that is not the calculation.

I agree. 770.00 is not 25% of 2676.75. There has to be more involved. One of the things I dislike about online software is you can't see the finished forms themselves, to get an idea of what is actually happening, and to look for errors, until you pay...sigh.

OP could try using another online software to see what result they get there. Unfortunely, the one that I did like, now has gone to a question and answer format like the other ones, so I don't like it as much as I used to, but you could try it..

taxesanytime.com

[FlyingRon]

No, it's almost exactly 28% which I suspect is really his tax rate.

[LdiJ]

Originally Posted by FlyingRon

No, it's almost exactly 28% which I suspect is really his tax rate.

Its closer to 28%, but its still not 28%.

[tranquility]

If his marginal tax rate is 28%, some of that could have been taxed at a lower rate. I thought tax programs always listed the marginal rate in the worksheets and believed the OP used the reported figure for his "bracket". If not, this could explain it.

[CPDavis73]

Thanks for all the replies everyone. I'm going to do my taxes using the software my brother uses, and I'll see if it comes out the same!

-Chris