Question

Why is turbotax assessing a long-term capital gains tax?

Forum|Forum|5 years ago
May 11, 2021
1 reply
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I understood that the long-term capital gains tax rate for 2020 is 0% if our taxable income is <$80,000 (married, filing jointly). Our taxable income is well below that (our major income was $55,000 from Social Security, which in any case is not taxable, right?), yet turbotax assesses 15% on the capital gains. Anybody know what's going on?

Thanks!

SusanY1

If the capital gain, when added to your other income, brings you over the income limit of $80,000 then you will be subject to the capital gains tax of 15% on your long term capital gains (unless they exceed $496,050 when the tax is higher). This added income can also cause a portion (no more than 85%) of your social security income to be subject to your ordinary income tax rates as well.

So if, for example, your social security income (jointly) is $55,000 and you have a $40,000 capital gain, you will pay tax on the capital gain and a portion of your social security income also becomes subject to tax (in this example, roughly half becomes taxable).

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