Question

tax Free long term capital gain

Forum|Forum|4 years ago
November 14, 2021
3 replies
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My husband and I will have a total of about 55k in income from, social security, unemployment, interest, dividends, and wages this year. We have some stock we'd like to sell this year that we've had for many years. When I put that amount of profit (about 1,000.)into the turbotax calculator, it changed the amount of my Federal Tax liability, but I thought LT gains were tax free based on our income?

fanfare

Employee

once you have unemployment or wages, your capital gains become taxable to some extent.

rjs

Employee

If your taxable income is $80,800 or less (for 2021, married filing jointly), there is no tax on your long-term capital gains. Unemployment or wages do not make any of the long-term capital gain taxable, as long as your total taxable income is $80,800 or less.

The percentage of your Social Security that is taxable depends on your other income. The additional income from the capital gain might have made more of your Social Security taxable, which would increase your tax, even though there is still no tax on the long-term capital gain itself.

You might also double-check your entries. Make sure you entered the capital gain as long-term, and make sure the entries for all your other income are correct.

What do you mean by the "TurboTax calculator"? Are you referring to TaxCaster, or the TurboTax 2021 software itself, or something else?

J

jkgvhardenAuthor

Thank you for the reply. I was referring to taxcaster. I will played around with it a bit to see if your idea about social security is the issue.

T

TomD8

Employee

Remember that your capital gain tax bracket is based on your filing status and your total taxable income - which includes the capital gain itself.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Hal_Al

Employee

If you have $55,000 in total other income and are filing as Married Filing Jointly (MFJ), you will not pay any tax on $1000 of long term capital gains.

$55,000 minus $25,100 standard deduction = ~$30,000 taxable income. $81,050 - $30,000 = ~$51,000.

The first ~$51,000 of capital gains will be taxed at 0%.

The "more of your social security is taxable" explanation is the most likely reason for "taxcaster" calculating more tax. See the work sheet on page 15 at https://www.irs.gov/pub/irs-pdf/p915.pdf