Generally, when an individual tax return with taxable income calculates $0 of income tax, the tax calculation is being done using one or more of several worksheets rather than using the tax tables.
To see why no tax is calculating in an individual tax return, print the return and look for one of several worksheets:
- Qualified Dividends and Capital Gain Tax Worksheet - Tax is figured on the Qualified Dividends and Capital Gain Tax Worksheet (found in the Form 1040 instructions) if any of the following is true:
- Qualified dividends are reported on Form 1040 line 3a.
- Capital gain distributions are reported on Form 1040 line 7 and Schedule D isn't required to be filed.
- Schedule D lines 15 and 16 are both more than zero, and Schedule D is required to be filed.
- Schedule D Tax Worksheet - Tax is figured on the Schedule D tax worksheet (found in the Schedule D instructions) if either of the following is true:
- Schedule D lines 15 and 16 are both more than zero, and Schedule D is required to be filed, and line 18 or 19 of Schedule D is more than zero.
- Irrespective of whether Schedule D must be filed, the taxpayer has to file Form 4952, Investment Interest Expense Deduction, and it shows an amount on line 4g.
- Foreign Earned Income Tax Worksheet - The Foreign Earned Income Tax Worksheet is used if the taxpayer claimed the foreign earned income exclusion, housing exclusion, or housing deduction on Form 2555. One of the other worksheets might also be used when this worksheet is used.
- Schedule J, Income Averaging for Individuals With Income from Farming or Fishing - If the taxpayer has income from farming or fishing, they can elect to calculate tax on Schedule J. This election is generally beneficial if the current year's income from farming or fishing is high and their taxable income for one or more of the three prior years was low.
Additional Information: