CARL WATTS & ASSOCIATES

February 04, 2019

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Form 1040, Schedule 2
Fill in Form 6251 instead of using the worksheet if you claimed or received any of the following item:

Accelerated depreciation.

Tax-exempt interest from private activity bonds.


Intangible drilling, circulation, research, experimental, or mining costs.

Amortization of pollution-control facilities or depletion.


Income or (loss) from tax-shelter farm activities, passive activities, partnerships, S corporations, or activities for which you aren't at risk.

Income from long-term contracts not figured using the percentage-of-completion method.

Investment interest expense reported on Form 4952.

Net operating loss deduction.

AMT adjustments from an estate, trust, electing large partnership, or cooperative.

Section 1202 exclusion.

Stock by exercising an incentive stock option and you didn't dispose of the stock in the same year.

Any general business credit claimed on Form 3800 if either line 6 (in Part I) or line 25 of Form 3800 is more than zero.

Qualified electric vehicle credit.

Alternative fuel vehicle refueling property tax.

Credit for prior year minimum tax.

Foreign tax credit.

Net qualified disaster loss and you are reporting your standard deduction on Schedule A, line 16.

If you're not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, you should complete and attach Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts to claim the minimum tax credit.

Schedule 2 also includes the Excess Advance Premium Tax Credit Repayment.

The premium tax credit helps pay premiums for health insurance purchased from the Marketplace. Eligible individuals may have advance payments of the premium tax credit paid on their behalf directly to the insurance company.

If you, your spouse with whom you are filing a joint return, or your dependent was enrolled in coverage purchased from the Marketplace and advance payments of the premium tax credit were made for the coverage, complete Form 8962, Premium Tax Credit, to reconcile the advance payments with your premium tax credit. The same Form 8962 is also used to claim the premium tax credit for those individuals who are eligible


You (or whoever enrolled you) should have received Form 1095-A from the Marketplace with information about your coverage and any advance credit payments. If the advance credit payments were more than the premium tax credit you can claim, the amount you must repay will be shown on Form 8962, line 29.

You may have to repay excess advance payments of the premium tax credit even if someone else enrolled you, your spouse, or your dependent in Marketplace coverage. In that case, another individual may have received the Form 1095-A for the coverage.

You also may have to repay excess advance payments of the premium tax credit if you enrolled an individual in coverage through the Marketplace, you don’t claim the individual as a dependent on your return, and no one else claims that individual as a dependent.

If all this seems complicated, know that it really is and you should always consult a tax professional who can guide you through the maze of income tax, credits and deductions efficiently and legally in all your dealings with the IRS.
The 2019 tax filing season is now open and the IRS are already accepting and processing federal tax returns.

In case we haven’t mentioned this often enough, as of this year, Form 1040 has been redesigned to mirror the changes brought by the Tax Cuts and Jobs Act (TCJA). The revised form consolidates Forms 1040, 1040A and 1040-EZ into one form that all individual taxpayers will use to file their 2018 federal income tax return.

The new form uses a building block approach that can be supplemented with six additional schedules, as needed. We have already dedicated newsletters to Form 1040 and Schedule 1 earlier this year. Let’s see what Schedule 2 is

Schedule 2 is intended for additional taxes that cannot be entered directly on Form 1040. These include the alternative minimum tax and the excess advance premium tax credit repayment.

Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax.

The AMT is the excess of the tentative minimum tax over the regular tax. Thus, the AMT is owed only if the tentative minimum tax is greater than the regular tax.

The tentative minimum tax is figured separately from tthe regular tax. In general, you can compute the tentative minimum tax by:

Computing taxable income eliminating or reducing certain exclusions and deductions, and taking into account differences with respect to when certain items are taken into account in computing regular taxable income and alternative minimum taxable income (AMTI),

Subtracting the AMT exemption amount,


Multiplying the amount computed in (2) by the appropriate AMT tax rates, and

Subtracting the AMT foreign tax credit.


As of 2018, there is a new starting point for the alternative minimum taxable income calculation. Instead of starting with the amount of your regular tax adjusted gross income (AGI) reduced by any itemized deductions, you will start your AMTI calculation with your taxable income for regular tax unless it is zero. In that case, you will start from regular tax AGI reduced by your itemized deductions (or standard deduction) and qualified business income deduction.

If you itemized your deductions for regular tax, only the state and local taxes and foreign income taxes you deducted on Schedule A need to be adjusted when figuring the AMTI.

The AMT exemption is the amount that you are allowed to deduct from the alternative minimum taxable income before calculating your AMT liability. The exemption amount depends on your filing status and has been increased as of 2018 due to the new tax law.

The AMT exemption amounts are as follows:



The AMT exemption amount is reduced one dollar for every four dollars of AMTI above the threshold amount for the taxpayer’s filing status.

Exemption phase-out thresholds are:



The exemption phases out completely at $781,200 for single/head of household, $1,437,600 for married filing jointly/surviving spouse, and $718,800 for married filing separately taxpayers.

If you awe AMT taxes, you need to file Form 6251, Alternative Minimum Tax - Individuals. If you aren't sure whether you owe any AMT, complete the Worksheet To See if You Should Fill in Form 6251 which can be found in the Instructions for Form 1040.

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