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

Forum|Forum|1 year ago
February 9, 2025
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Best answer by SteamTrain

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

SteamTrain

Employee

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.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

hickey_jackAuthor

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%

SteamTrainAnswer

Employee

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

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

allenstrong

Same thing happened to me. My tax liability went up when I entered in the long-term capital gains. When I investigated (Federal Review tab/ 2024 tax breakdown) I discovered that the increased tax liability was for my Affortable Care Act premium increase. Affortable Care Act premiums are based on MAGI which includes capital gains income. In other words, the capital gains income lowered my health insurance premium tax credit...hence more tax liability. Hope this helps.

scapjm

Thank you so much! I figured out what was causing the increased tax. We had a bit of capital losses. Before we entered the capital gain, the losses were a deduction to ordinary income. Before we entered the gain, those losses reduced the actual taxable income. But when we put the capital gain in, it shifted the capital loss to reduce the capital gain. so we lost that loss as a deduction. 😜