Desktop: Tax Computation Menu

Income Averaging for Farmers and Fisherman (Sch J) - If farm income is high in the current year and low in any of the three prior years, a farmer may qualify to lower tax by income averaging. Use Schedule J, Form 1040 to calculate the tax. Any taxpayer engaged in a farming business can use income averaging to figure tax. There is no minimum farm income requirement for income averaging, however having low farm income relative to total income may provide little benefit under the income averaging calculation.

Tax for Children Under Age 18 (8615) - This form is used to figure the tax on unearned income by certain children in their tax return. The taxpayer child may or may not be a dependent, and the same rules apply to step-children and legally adopted children. The form must be filed if five tests are met:

1. The child had more than $2,100 (2018) or $2,200 (2019-2020) of unearned income.
2. The child is otherwise required to file a tax return.
3. The child is either:
• under age 18 at the end of the tax year;
• age 18 at the end of the tax year and half their support or less was from earned income;
• age 19 to 23 at the end of the tax year, a full-time student, and half their support or less was from earned income.
4. At least one of the child’s parents was alive at the end of the tax year.
5. The child is not filing a joint return for the tax year.

For more detailed information, see the instructions for Form 8615, especially for the definitions of unearned income and support.

In any case, if the child files a joint return for the tax year, or if neither of the child's parents were alive at the end of the tax year, do not use Form 8615 to figure the tax.

The parent may be able to elect to report the child's interest, ordinary dividends, and capital gain distributions on the parent's return. If the parent makes this election, the child will not have to file a return or Form 8615. However, the federal income tax on the child's income, including qualified dividends and capital gain distributions, may be higher if this election is made.

Tax - Income tax is calculated using one of the following methods as required:

• Foreign Earned Income Tax Worksheet - This worksheet is used if the taxpayer claimed the foreign earned income exclusion, the housing exclusion, or the housing deduction on Form 2555. This worksheet also utilizes one of the other worksheets in its calculation.
• Form 8615 - Form 8615, Tax for Certain Children Who Have Unearned Income, utilizes one or the other of other worksheets in its calculation and is required for a taxpayer who meets certain conditions. This form has its own line in this menu - see below.
• Schedule D Tax Worksheet - The Schedule D Tax Worksheet (in the Schedule D instructions) is used if the following are true:
  • The taxpayer is required to file Schedule D, and Schedule D includes an amount on line 18 (from the 28% Rate Gain Worksheet) or line 19 (from the Unrecaptured Section 1250 Gain Worksheet).
  • The tax return does not include Form 2555. (The Foreign Earned Income Tax Worksheet must be used instead.)
  • In 2020, the return includes Form 4952, Investment Interest Expense Deduction, and there is an amount on line 4e or 4g.
• Qualified Dividends and Capital Gain Tax Worksheet - This worksheet is used if (a) the taxpayer isn't required to use the Schedule D Tax Worksheet, (b) the return doesn't include Form 2555, and (c) any of the following are true:
  • Qualified dividends are reported on Form 1040 line 3a.
  • Schedule D isn't included but capital gains are reported on:
    2018 - Schedule 1 (Form 1040) line 13.
    2019 - Form 1040 line 6.
    2020 - Form 1040 line 7.
  • Schedule D is included and Schedule D lines 15 and 16 are both gains.
• Tax Tables - The tax tables are used if none of the previous methods are used and if the taxpayer's taxable income is under $100,000.
• Tax Computation Worksheet - The tax computation worksheet is used if none of the previous methods are used and the taxpayer's taxable income is $100,000 or greater.

Child's Interest and Dividends (8814) - Parents can elect to report their child's income on their return, but all of these tests must be met:

• The child was under age 19 (or under age 24 if a full-time student) at the end of the tax year.
• The child’s gross income is less than $11,000 (2021) or $11,500 (2022- ).
• All of the child’s income is from interest, dividends, capital gains distributions, and Alaska Permanent Fund Dividends.
• The child is not filing a joint return.
• No federal income tax was withheld on the child’s income.
• No estimated tax payments were made for the child.
• The taxpayer is the parent whose return may be used. In the case of parents filing MFS, the election can only be made on the return with the higher income.

The election is made by filing Form 8814 with the parents’ return by the due date (including extensions). A separate Form 8814 must be filed for each child.

Tax on Lump-Sum Distribution (4972) - Use Form 4972 to figure the tax on a qualified lump-sum distribution the taxpayer received in the tax year using the 20% capital gain election, the 10-year tax option, or both. These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if the taxable amount of the distribution is reported as ordinary income. The tax is paid only once in the year the taxpayer received the distribution, not over the next 10 years. The separate tax is added to the regular tax figured on your other income.

For additional information, see these IRS publications:

• Publication 575, Pension and Annuity Income (Including Simplified General Rule)
• Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits
• Publication 939, General Rule for Pensions and Annuities

Alternative Minimum Tax (6251) - See here for info on AMT.

Excess Premium Tax Credit Repayment (8962) - See here for info on Form 8962.

Tax - Income tax is calculated using one of the following methods as required:

• Foreign Earned Income Tax Worksheet - This worksheet is used if the taxpayer claimed the foreign earned income exclusion, the housing exclusion, or the housing deduction on Form 2555. This worksheet also utilizes one of the other worksheets in its calculation.
• Form 8615 - Form 8615, Tax for Certain Children Who Have Unearned Income, utilizes one or the other of other worksheets in its calculation and is required for a taxpayer who meets certain conditions. This form has its own line in this menu - see below.
• Schedule D Tax Worksheet - The Schedule D Tax Worksheet (in the Schedule D instructions) is used if the following are true:
  • The taxpayer is required to file Schedule D, and Schedule D includes an amount on line 18 (from the 28% Rate Gain Worksheet) or line 19 (from the Unrecaptured Section 1250 Gain Worksheet).
  • The tax return does not include Form 2555. (The Foreign Earned Income Tax Worksheet must be used instead.)
  • In 2020, the return includes Form 4952, Investment Interest Expense Deduction, and there is an amount on line 4e or 4g.
• Qualified Dividends and Capital Gain Tax Worksheet - This worksheet is used if (a) the taxpayer isn't required to use the Schedule D Tax Worksheet, (b) the return doesn't include Form 2555, and (c) any of the following are true:
  • Qualified dividends are reported on Form 1040 line 3a.
  • Schedule D isn't included but capital gains are reported on:
    2018 - Schedule 1 (Form 1040) line 13.
    2019 - Form 1040 line 6.
    2020 - Form 1040 line 7.
  • Schedule D is included and Schedule D lines 15 and 16 are both gains.
• Tax Tables - The tax tables are used if none of the previous methods are used and if the taxpayer's taxable income is under $100,000.
• Tax Computation Worksheet - The tax computation worksheet is used if none of the previous methods are used and the taxpayer's taxable income is $100,000 or greater.

Income Averaging for Farmers and Fisherman (Sch J) - If farm income is high in the current year and low in any of the three prior years, a farmer may qualify to lower tax by income averaging. Use Schedule J, Form 1040 to calculate the tax. Any taxpayer engaged in a farming business can use income averaging to figure tax. There is no minimum farm income requirement for income averaging, however having low farm income relative to total income may provide little benefit under the income averaging calculation.

Tax for Children Under Age 18 (8615) - This form is used to figure the tax on unearned income by children. The taxpayer child may or may not be a dependent, and the same rules apply to step-children and legally adopted children. The form must be filed if five tests are met:

1. The child had more than $2,100 (2018) or $2,200 (2019-2020) of unearned income.
2. The child is otherwise required to file a tax return.
3. The child is either:
• under age 18 at the end of the tax year;
• age 18 at the end of the tax year and half their support or less was from earned income;
• age 19 to 23 at the end of the tax year, a full-time student, and half their support or less was from earned income.
4. At least one of the child’s parents was alive at the end of the tax year.
5. The child is not filing a joint return for the tax year.

For more detailed information, see the instructions for Form 8615, especially for the definitions of unearned income and support.

In any case, if the child files a joint return for the tax year, or if neither of the child's parents were alive at the end of the tax year, do not use Form 8615 to figure the tax.

The parent may be able to elect to report the child's interest, ordinary dividends, and capital gain distributions on the parent's return. If the parent makes this election, the child will not have to file a return or Form 8615. However, the federal income tax on the child's income, including qualified dividends and capital gain distributions, may be higher if this election is made.

Child's Interest and Dividends (8814) - Parents can elect to report their child's income on their return, but all of these tests must be met:

• The child was under age 19 (or under age 24 if a full-time student) at the end of the tax year.
• The child’s gross income is less than $10,500 (2018) or $11,000 (2019-2020).
• All of the child’s income is from interest, dividends, capital gains distributions, and Alaska Permanent Fund Dividends.
• The child is not filing a joint return.
• No federal income tax was withheld on the child’s income.
• No estimated tax payments were made for the child.
• The taxpayer is the parent whose return may be used. In the case of parents filing MFS, the election can only be made on the return with the higher income.

The election is made by filing Form 8814 with the parents’ return by the due date (including extensions). A separate Form 8814 must be filed for each child.

Tax on Lump-Sum Distribution (4972) - Use Form 4972 to figure the tax on a qualified lump-sum distribution the taxpayer received in the tax year using the 20% capital gain election, the 10-year tax option, or both. These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if the taxable amount of the distribution is reported as ordinary income. The tax is paid only once in the year the taxpayer received the distribution, not over the next 10 years. The separate tax is added to the regular tax figured on your other income.

For additional information, see these IRS publications:

• Publication 575, Pension and Annuity Income (Including Simplified General Rule)
• Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits
• Publication 939, General Rule for Pensions and Annuities

Tax from Recapture of an Education Credit - The taxpayer may owe this tax if they claimed an education credit in an earlier year, and the taxpayer, the spouse or the dependent subsequently received either tax-free educational assistance or a refund of qualified expenses during the current year for the student. See the Form 8863 instructions for more information.

Tax Due to Making a Section 962 Election - The section 962 election is available to US taxpayers who own interest in a foreign business and who have earnings that are taxed both in the foreign locality as well as in the US. Depending on the taxpayer's situation, this election may reduce or eliminate double taxation.

The section 962 election is made on an annual basis, and if the taxpayer makes the election you will enter here the tax calculated under the election. Attach a statement to the return, either as a preparer note or in PDF form, explaining the calculation.

For more information, see section 962 in the Federal Code here.

Tax From Form 8621 Relating to a Section 1291 Fund - Taxpayers who are shareholders in a passive foreign investment company (PFIC) may need to file Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. A Section 1291 fund is an investment in which the taxpayer hasn't made the election for the investment to be treated as a Qualifying Electing Fund (QEF). Tax calculated on Form 8621 Part V Line 16e will be entered here. See Internal Revenue Bulletin 2017-4 for more information.

Net Tax Liability Deferred from Section 965(i) - Enter here the net tax liability deferred under IRC Section 965(i). This entry is a negative number.

Triggered Deferred Net 965 Tax Liability - If the taxpayer had a triggering event under IRC Section 965(i) during the year and hasn't entered into a transfer agreement, enter here the amount of the triggered deferred net 965 tax liability.

Qualified Business Income Deduction - See here for an overview of the QBID.

Tax - Income tax is calculated using one of the following methods as required:

• Foreign Earned Income Tax Worksheet - This worksheet is used if the taxpayer claimed the foreign earned income exclusion, the housing exclusion, or the housing deduction on Form 2555. This worksheet also utilizes one of the other worksheets in its calculation.
• Form 8615 - Form 8615, Tax for Certain Children Who Have Unearned Income, utilizes one or the other of other worksheets in its calculation and is required for a taxpayer who meets certain conditions. This form has its own line in this menu - see below.
• Schedule D Tax Worksheet - The Schedule D Tax Worksheet is used if both of the following are true:
  • The taxpayer is required to file Schedule D, and Schedule D includes an amount on line 18 (from the 28% Rate Gain Worksheet) or line 19 (from the Unrecaptured Section 1250 Gain Worksheet).
  • The tax return does not include Form 2555. (The Foreign Earned Income Tax Worksheet must be used instead.)
• Qualified Dividends and Capital Gain Tax Worksheet - This worksheet is used if (a) the taxpayer isn't required to use the Schedule D Tax Worksheet, (b) the return doesn't include Form 2555, and (c) any of the following are true:
  • Qualified dividends are reported on Form 1040 line 9b.
  • Schedule D isn't included but capital gains are reported on Form 1040 line 13.
  • Schedule D is included and Schedule D lines 15 and 16 are both gains.
• Tax Tables - The tax tables are used if none of the previous methods are used and if the taxpayer's taxable income is under $100,000.
• Tax Computation Worksheet - The tax computation worksheet is used if none of the previous methods are used and the taxpayer's taxable income is $100,000 or greater.

Income Averaging for Farmers and Fisherman (Sch J) - If farm income is high in the current year and low in any of the three prior years, a farmer may qualify to lower tax by income averaging. Use Schedule J, Form 1040 to calculate the tax. Any taxpayer engaged in a farming business can use income averaging to figure tax. There is no minimum farm income requirement for income averaging, however having low farm income relative to total income may provide little benefit under the income averaging calculation.

Tax for Children Under Age 18 (8615) - This form is used to figure the tax on unearned income over $2,100 by children. The taxpayer child may or may not be a dependent, and the same rules apply to step-children and legally adopted children. The form must be filed if five tests are met:

1. The child had more than $2,100 of unearned income.
2. The child is otherwise required to file a tax return.
3. The child is either:
• under age 18 at the end of the tax year;
• age 18 at the end of the tax year and half their support or less was from earned income;
• age 19 to 23 at the end of the tax year, a full-time student, and half their support or less was from earned income.
4. At least one of the child’s parents was alive at the end of the tax year.
5. The child is not filing a joint return for the tax year.

For more detailed information, see the instructions for Form 8615, especially for the definitions of unearned income and support.

In any case, if the child files a joint return for the tax year, or if neither of the child's parents were alive at the end of the tax year, do not use Form 8615 to figure the tax.

The parent may be able to elect to report the child's interest, ordinary dividends, and capital gain distributions on the parent's return. If the parent makes this election, the child will not have to file a return or Form 8615. However, the federal income tax on the child's income, including qualified dividends and capital gain distributions, may be higher if this election is made.

Child's Interest and Dividends (8814) - Parents can elect to report their child's income on their return, but all of these tests must be met:

• The child was under age 19 (or under age 24 if a full-time student) at the end of the tax year.
• The child’s gross income is less than $10,500.
• All of the child’s income is from interest, dividends, capital gains distributions, and Alaska Permanent Fund Dividends.
• The child is not filing a joint return.
• No federal income tax was withheld on the child’s income.
• No estimated tax payments were made for the child.
• The taxpayer is the parent whose return may be used. In the case of parents filing MFS, the election can only be made on the return with the higher income.

The election is made by filing Form 8814 with the parents’ return by the due date (including extensions). A separate Form 8814 must be filed for each child.

Tax on Lump-Sum Distribution (4972) - Use Form 4972 to figure the tax on a qualified lump-sum distribution the taxpayer received in the tax year using the 20% capital gain election, the 10-year tax option, or both. These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if the taxable amount of the distribution is reported as ordinary income. The tax is paid only once in the year the taxpayer received the distribution, not over the next 10 years. The separate tax is added to the regular tax figured on your other income.

For additional information, see these IRS publications:

• Publication 575, Pension and Annuity Income (Including Simplified General Rule)
• Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits
• Publication 939, General Rule for Pensions and Annuities

Tax from Recapture of an Education Credit - The taxpayer may owe this tax if they claimed an education credit in an earlier year, and the taxpayer, the spouse or the dependent subsequently received either tax-free educational assistance or a refund of qualified expenses during the current year for the student. See the Form 8863 instructions for more information.