"It seems that TurboTax tool is calculating long-term capital gain at 40% tax rate. My research shows that it should not exceed 20%. Can someone help me? (2024)

‎June 4, 20197:49 PM

Turbotax calculates your cap gains tax on the Qualified Dividend/Long Term Capital gains worksheet, and that calculation is accurate.
However, if your income is high enough that you are subject to the Alternative Minimum Tax, you can be seeing a secondary effect. When you are subject to the AMT, you have a deduction which can be reduced. That deduction is reduced based on the amount of capital gains that you have. What that does is it still taxes the cap gains at your maximum cap gains rate, but the reduction in the AMT deduction means that more of your other income is subject to the AMT and your tax goes up by more than what you would expect from the cap gains tax alone. It is a clever way that congress found to increase cap gains tax without increasing the cap gains rate.
You can find the details of the calculation by looking at Form 6251 in your tax return. Or see a blank 6251 at this link:
https://www.irs.gov/pub/irs-pdf/f6251.pdf

Is it just the TaxCaster tool that says that, or is it the program itself?

Although 40% sounds quite high, MANY other things can change when you have more income.Social Security Benefits may be taxable, many credits and deductions may be reduced or eliminated, your personal exemptions and itemized deductions may be phased out, and/or you may be subject to the 3.8% Net Investment Income Tax.

I have a similar issue with TurboTax online Premier Version for 2019. TurboTax took my total long-term capital gain distribution as reported by my mutual funds and entered it on Line 6 and checked the box "No Schedule D required) on the first page of my return to arrive at the AGI. It appears my total long-term capital gain distribution was treated as dividend/short-term capital gain while it should be taxed at a much lower rate.

I do not believe I would have entered my long-term capital gain distribution incorrectly in the TurboTax inquires as I had been using TurboTax online Premier Version for many years. In my 2018 return, a Schedule D was included in my return.

Is it possible to retrieve the actual entries in the online Premier Version to verify the correctness of my entries for 2019? If it is an error by TurboTax, how can it be corrected with IRS and the US Government to get back some money as it also affected my Medicare and Part D drug premiums paid in 2020? Please help.

TurboTax took my total long-term capital gain distribution as reported by my mutual funds and entered it on Line 6 and checked the box "No Schedule D required) on the first page of my return to arrive at the AGI. It appears my total long-term capital gain distribution was treated as dividend/short-term capital gain while it should be taxed at a much lower rate.

this is exactly correct and proper if you had no transactions that need to be reported on Schedule D/ form 8949. all capital gains including capital gain distributions are includable in adjusted gross income. within the Turbotax file there should be a qualified dividend and long-term capital gain worksheet where the lower tax is computed on those items.