OK. I am in the home stretch of finishing my taxes, thanks to all of you. Our income is from 2 sources - $45,000 from social security… and $150,000 was long term capital gains from selling stock. I am using Turbo Tax, but am new to TT, so am not sure of a lot… Does Turbo Tax simply add those two figures together ($190,000) and my tax bracket is X (percentage) is owed from there? I guess social security is taxed (bummer) or I would owe a lot less. Thanks for your help.
I seriously doubt those two sources of income are added together. Capital gained are not taxed until t reach some threshold value. When I have used tax software, I would enter those numbers separately. TT used to have an interview process and it would ask for 1099 information that will separate the two income items you mentioned.
No. SS is taxed at ordinary income rates and LTCG are taxed at LTCG rates. 2 different brackets.
Yes, since your other income alone, without even counting SS, is more than $44k, 85% of your SS is taxable.
Not really. 85% of $45k is $38,250 IIRC, you are both over 65, so your MFJ standard deduction is $30,700 - so only $7,550 of your SS will be taxed, and it will be taxed at a rate of 10%, since that bracket goes up to $19,050 for MFJ. So the tax on your SS income is $755
Most of your tax liability is due to the LTCG tax. Capital gains are stacked on top of your other income. For 2024 MFJ, after adjusting for the standard deduction, anything over $94,050 is taxed at 15%
So you have:
Standard deduction applied to first $30,700 of SS - no tax
Next $7,550 of SS - taxed at 10% = $755
First $86,500 of LTCG - taxed at 0% capital gains rate - no tax
Remaining $63,500 of LTCG - taxed at 15% = $9,525
Total taxes = $10,280
If you did not make quarterly estimated payments to the IRS, you may also have underpayment penalties.
For 2025, if you are selling more stock, keep in mind that for MFJ above $250k in taxable income, there will be an additional tax of 3.8% on your taxable LTCG. I would also point out that in 2025 with $45k in SS, if you are realizing more than about $170k in capital gains, you will probably be triggering IRMAA for 2027.
AJ
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