1040/Schedule D on Long Term Capital Gains

[Beerguy]

What is the name of your state? California

Hi. I'm confused on the mechanics of taxation on Long Term Capital Gains. If I understand correctly, LT Cap Gains should be taxed at 15% (I'm in a 28% Bracket). But I don't understand on the flow of the tax forms how this is done. LTCG is reported on Part 2 of Schedule D, and then rolled over to Line 16 of the 1040, and then it rolls up to Total Income (1040 Line 37) and ultimately to my AGI which serves as my taxable income...as near as I can tell, this is then taxed at my 28% just like all my other income. So my question is where (or how) is the LTCG tax rate mitigated to the lower rate than my general tax rate? Appreciate your help.

 

[FlyingRon]

I don't know where you get line 37 on the 1040, the numbers don't go up that high. What happens is you get down to line 11 and you'll end up using the "Qualified Dividends and Capital Gain Tax Worksheet " to compute the tax (and report it on 11a). This worksheet merges the other income and the long term gains (at 15%). The worksheet is in the 1040 instructions around page 40.

 

[Beerguy]

Thanks Ron. Actually looking at my 2017 TY where it had the "old" 1040 form where Line 29, last one of the first page, is total AGI. I will have a look at that worksheet....thank you for the help.

 

[FlyingRon]

Ok, Page 44 of the instructions then. Other than the line number differences between the two years, everything is roughly the same.

 

[Beerguy]

I think I figured it out. On the 2017, the adjustment is made on the Schedule D worksheet and the amount ultimately ported over to Line 44 of the 1040 (Tax on Income). Thank you for your help!