1040-US: Calculation of General Sales Tax Deduction Worksheet, line 3

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Question

Which nontaxable income amounts used to determine total income for the optional state and local sale tax tables, are included in the calculation of line 3 of the General Sales Tax Deduction Worksheet?

Answer

The tax application uses the following amounts in the calculation of line 3:

  • Amounts entered in Screen A, Non-taxable income. This may include, but is not limited to Veterans’ (VA) benefits, workers’ compensation and public assistance payments.
  • Nontaxable combat pay included in Screen W2, Box 12, Code Q.
  • The refundable portion of refundable tax credits from the prior year, as determined by amounts on the Two Year Comparison Report. Refundable tax credits utilized in the 2017 calculation include the earned income credit, additional child tax credit, refundable American Opportunity Credit (AOTC), net premium tax credit, credit for excess social security and tier 1 RRTA tax withheld, health coverage tax credit, refundable credit for prior year minimum tax, credit for federal tax paid on fuels, and credit for taxes paid by a regulated investment company or real estate investment trust on undistributed long-term capital gains.

    The following example illustrates how the refundable portion of refundable tax credits from the prior year calculates.

    Two Year Comparison Line Amount
    Total tax 1,800
    Income tax withheld 5,000
    Additional child tax credit 950
    Other refundable tax credits 1,200
    Other payments 300
    Total payments 7,450
    Tax due/-refund -5,650

The application calculates the refundable portion of refundable tax credits by computing refundable credits as a percentage of total payments, and multiplying the result by the net refund. Therefore, using the amounts above, refundable credits as a percentage of total payments is 0.288590604 ($2,150, comprised of the $950 additional child tax credit plus $1,200 other refundable tax credits, divided by total payments of $7,450). This result is then multiplied by the net refund ($5,650) to arrive at the refundable portion of refundable credits ($1,631) reported on line 3 of the General Sales Tax Deduction Worksheet.

Related topic: Sales tax FAQs (1040)

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