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You are wrong.

First, let's state that you are referring to taxable income, not gross income. The former is usually non-trivially smaller than the latter, due to adjustments (including pre-tax paycheck deductions) and itemized/standard deduction.

Using 2023 numbers (since we don't know whether 2024 tax law will change between now and the end of the year), and your dollar amounts:

$400K of ordinary taxable income tops out at 35% marginal rate, the total tax is $111,895.

$120K of LTCG income is taxed as follows:

$92,300 x 15% = $13,845

$27,700 x 20% = $5,540

Total LTCG tax = $19,385

(the 2023 LTCG 15% bracket tops out at $492,300)



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