Line 43
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STEP 8 TAX CALCULATION

43. TAX OR ALTERNATE TAX.

Compare the regular tax from the tax tables with the alternate tax calculated below and enter the smaller on line 43. If the taxable income on line 42 exceeds $95,150, use the formula at the end of the tax tables to compute your tax.

ALTERNATE TAX MAY REDUCE TAX LIABILITY.
Single taxpayers do not qualify for the alternate tax calculation.

Filing statuses 2, 3, 4, 5, and 6:
If the combination of your net income from line 26 PLUS any pension exclusion taken on line 21 exceeds $13,500, you may owe less tax by completing the worksheet below to compute your tax liability. Enter this alternate tax on line 43 if it is less than the tax from the tax table.

If you are married filing separately and one spouse has a net operating loss that will be carried back or forward, then you cannot use the alternate tax computation. If the spouse with the net operating loss elects not to carry the net operating loss back or forward, then you can use the alternate tax computation. A statement must be attached to the return saying that the spouse with the net operating loss will not carry it back or forward.

ALTERNATE TAX WORKSHEET

1. Enter the total of net income from line 26 and pension exclusion from line 21 of the IA1040. Filing statuses 3 or 4 enter combined totals of both spouses. 1.  
2. Subtract $13,500 from line 1, enter the difference on line 3. 2. - 13,500
3. Income subject to alternate tax. 3.  
4. Multiply line 3 by 8.98%. (.0898) 4.  
5. Using the tax tables, determine the tax on the taxable income from line 42 of the IA1040 and enter here. Status 3 and 4 filers calculate tax separately, combine and enter total here. 5.  
6. Compare the amounts on line 4 and line 5. Enter the smaller amount here and on line 43, IA1040. 6.  

EXAMPLE

You: $8,000 net income from line 26 of the IA 1040
Spouse: $6,000 net income from line 26 of the IA 1040
They are using Filing Status 3.

1. Enter the net income total(s) from line 26 and pension exclusion(s) from line 21 of the IA1040. Filing statuses 3 or 4: Enter combined totals of both spouses. 1. 14,000
2. Subtract $13,500 from line 1, enter the difference on line 3. 2. - 13,500
3. Income subject to alternate tax. 3. 500
4. Multiply line 3 by 8.98%. (.0898) 4. 45
5. Using the tax tables, determine the tax on the taxable income from line 42 of the IA1040 and enter here. Status 3 and 4 filers calculate tax separately*, combine and enter total here. 5.

TOTAL: 340

6. Compare the amounts on line 4 and line 5. Enter the smaller amount here and on line 43, IA1040. 6. 45

* In this example, the spouse's tax is $125 and yours is $215
** In this example, the amount to enter on line 43 for the spouse is $19; the amount to enter for you is $26.

MARRIED SEPARATE FILERS:
(including status 4):

Use the combined net incomes of both spouses to compute the alternate tax. (If you are status 4 and do not provide the other spouse’s income in step 2 of the IA 1040, you will not be allowed the alternate tax calculation.)

Divide the alternate tax between spouses in the ratio of the net income of each spouse to the combined net income of both spouses.

(Examples of how to prorate)

The Alternate Tax Calculation Worksheet
is available as a fillable pdf.

Go to Line 42

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