Incorrect Capital Gains calculation with HR Block software

[dcabrera345]

I have a capital gain from a 2016 mutual fund sale. The total gain was $13,000. With the gain, I am in the 33% tax bracket, but the software shows a 20% LT capital gains rate. What am I missing?

Thanks

[LouisH]

Hi dcabrera345,

Welcome to the H&R Block community.

Your capital gains rate is not the same as your normal tax rate.  If this was a long-term gain then your correct capital gains rate is 20% since you're in the top tier of the tax brackets (33% to 39.6%).  If you were one tax bracket lower your capital gains rate would be 15%.

A long-term gain is one realized from selling an asset or security item that was held for more than one year.  If your mutual funds were less than one year old at the time of sale then I would review all of you entries as that is a short-term gain.

If you have any other questions I'll be glad to help.

Louis,

Senior Tax Advisor (Tampa, FL)

[LouisH · Accepted solution]

Also, note that when you have long-term capital gains your capital gains income is taxed at the 0%, 15%, or 20% rate and your normal income is taxed at your normal tax rate (33% for you).  The tax is figured on the Schedule D worksheet rather than the 1040 so things may not seem to you the way they normally appear on your tax return, but so long as the gain was long-term the information you're seeing is accurate.

[dcabrera345]

Hi LouisH,

I really appreciate your reply.  My confusion is I thought for a married/joint return in 2016, only the 39.6% marginal bracket was 20%, all other marginal brackets were either 15% or 0% for long-term gains.  I checked a number of sources to confirm. I also changed my other income in the software to put me in a 28% bracket and the capital gains rate is still 20%.