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STEP
8 TAX CALCULATION
43. TAX OR ALTERNATE TAX.
If the taxable income on line 42 exceeds $95,150, use the formula at the end of the tax tables to compute your tax.
Compare the regular tax from the tax tables with the alternate tax calculated below and enter the smaller on line 43.
ALTERNATE TAX MAY REDUCE TAX
LIABILITY.
Taxpayers using filing status 1 do not qualify
for the alternate tax calculation.
Filing statuses 2, 3, or 4 with net operating
loss:
The special tax computation is not available
to married taxpayers using filing status 2, 3, or 4 when one spouse has a net
operating loss and the spouse elects to carry back or carry forward the net
operating loss. If the spouse with the net operating loss elects not to carry
the net operating loss back or forward, then the alternate tax computation
is allowed. A statement that the taxpayer will not carry forward or carry back
the net operating loss must be attached to the return.
Filing statuses 2, 3, 4, 5, and 6 without
net operating loss:
If the combination of your net income(s) 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.
ALTERNATE TAX WORKSHEET
| 1. Add the total net income(s) from line 26 and pension exclusion from line 21 of the IA1040, and enter here. 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 look up the 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 1
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. Add the total net income(s) from line 26 and pension exclusion from line 21 of the IA1040, and enter here. 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 look up the tax separately, combine and enter total here.* | 5. |
205 |
| 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 $62 and yours is $143.
** In this example, the amount to enter on line 43 for the spouse is $19; the amount to enter for you is $26.EXAMPLE 2
Married couple with net income from line 26 of the IA 1040 of $11,000.
They have a pension exclusion on line 21 of the IA 1040 of $4,000.
They are using Filing Status 2.
1. Add the total net income(s) from line 26 and pension exclusion from line 21 of the IA1040, and enter here. Filing statuses 3 or 4 enter combined totals of both spouses. 1. 15,000 2. Subtract $13,500 from line 1, enter the difference on line 3. 2. - 13,500 3. Income subject to alternate tax. 3. 1,500 4. Multiply line 3 by 8.98%. (.0898) 4. 135 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 look up the tax separately, combine and enter total here. 5. 175
6. Compare the amounts on line 4 and line 5. Enter the smaller amount here and on line 43, IA1040. 6. 135
Married Separate Filers: (including status 4):
Use the combined net incomes of both spouses to compute the alternate tax. (If you are filing status 4 and do not provide the other spouse’s income in step 2 of the IA 1040, you are not allowed to use the alternate tax calculation.)
Prorate the alternate tax between spouses in the ratio of the net income of each spouse to the combined net income of both spouses.
The Alternate Tax Calculation Worksheet
is available as a fillable pdf.