22.1 Taxable Income and Regular Income Tax Liability

The way you determine your regular tax liability depends on the amount of your taxable income and in some cases the type of income you have. If your taxable income is less than $100,000, you generally must use the IRS Tax Table to look up your tax (22.2). If your taxable income is $100,000 or more, you use the Tax Computation Worksheet to determine the tax (22.3). However, if you have net capital gain or qualified dividends, you generally figure your tax on the Qualified Dividends and Capital Gain Tax Worksheet in the IRS instructions for Form 1040 (22.4). Tax is figured on the Foreign Earned Income Tax Worksheet if you claim the foreign earned income or housing exclusion, or on Form 8615 if the “kiddie tax” computation (24.4) must be made.

Taxable income is your adjusted gross income (12.1) minus the following: (1) your standard deduction or itemized deductions, whichever you claim, and (2) deductions for personal exemptions (21.1). On Form 1040 for 2012, taxable income is entered on Line 43. On Form 1040A and Form 1040EZ, the computation of taxable income generally takes fewer steps because only limited types of income and deductions may be reported. Itemized deductions may not be claimed. Personal exemptions for dependents may be claimed on Form 1040A but not on Form 1040EZ. See the table on page 8 for the types of income and deductions that may not be reported on these forms.

On Form 1040A for 2012, taxable income is entered on Line 27; on Form 1040EZ, it is on Line 6.

AMT computation: regardless of how your regular tax liability is determined, you may also be liable for alternative minimum tax (AMT), which is figured on Form 6251 (23.1). If the tentative AMT figured on Form 6251 exceeds your regular tax (less any foreign tax credit and special averaging tax (7.4) on a lump-sum distribution if born before January 1, 1936), the excess is your AMT liability, which must be reported as an additional tax on Line 45 of Form 1040.