Tax seems too low; could it be right?

I have income from dividends (mostly qualified), interest, and SS. After deductions and exemptions I have adjusted income of $79,000. The tax software says I have taxes of $886. But I also have an American Op Credit (for my son in college) of $1,886, so I get a refund of $1,000. I like that result, but it seems way too low.

Is the tax on $79,000 really be only $886? I don't hit AMT this year; in the past I have had some pretty big tax bills based on the same income.

I guess a second question might be, is AMT changed? Just wondering why I didn't hit it.

Thanks much.

Reply to
Troubled
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Not enough information, for example your age and filing status are involved in determining your tax. But to answer your question, if your taxable income is $79K, it seems very unlikely your federal tax would be only $886.

UNLESS.... you fall in the tax bracket where your qualified dividends are taxed at zero percent, and those were the lion's share of your taxable income. Then I could maybe see that happening.

I do not mean this as a criticism, but since you are using a few technical terms incorrectly ("After deductions and exemptions I have adjusted income...") I'm not sure we're getting an accurate story. For example, your tax liability and your balance due are very different things, in most cases. Did you send in any estimated payments during the year (your div, int, and SS income most likely had no withholding).

Maybe referencing the line numbers on your 1040 would help. What is your AGI (last line on front page of 1040)? What is your taxable income (see pg 2 of 1040)? What filing status?

AMT hasn't changed, the qual. dividends would be taxed similarly under AMT.

Reply to
Mark Bole

I dug through the tax software and found it was deducting 73,800 from my qualified dividends. I then googled on "73,800 tax" and found that the first 73,800 of long term capital gains are taxed at 0% for those below a certain income!

That would explain my low taxes if it were right. But how could that be right?!

Reply to
Troubled

Married, filing jointly 61

I believe that is it.

I had mainly qualified dividends with small amount of nonqualified dividends and interest. As nearly as I can figure the deductions and exemptions are applied first against the small nqd and interest, leaving me with 79,265 of taxable income; all from qualified dividends. Is that how it is done?

Taxable income on line 1 of the Schedule D Tax Worksheet is $79,265. The software then subtracts 73,800, leaving only 5985 on line 23 at 15%, or 898 on line 29. The college tuition credit is 2500, which wipes out my tax and leaves me with a 40% refundable credit, or 1000 refund.

This just sounds too good to be true. Does it sound right? Unfortunately NYS still wants their pound of flesh.

Reply to
Troubled

The tax rate on qualified dividends contained within the ordinary 15% tax bracket is zero percent. So, yes your tax on all those qualified dividends is miniscule. And, yes the AOTC nonrefundable credit will wipe out your tax liability and the refundable portion will trigger a refund.

Reply to
Alan

On 2015-02-14 19:02, Troubled wrote:

Reply to
Mark Bole

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