Line 9b asks: How much of your state+local+foreign income tax is due to your investment income?
(I'm going to assume no foreign tax for this question.)
It would make sense that the value would be calculated using the ratio of your total investment income: (Form 8960, Line 8 ) divided by your AGI (1040 Line 11). You then simply multiply your state+local taxes by this ratio.
Form 8960, Line 9b =
(Investment income; Form 8960, Line 8 ) / (AGI; 1040 Line 11) x (State+Local Taxes; Schedule A, Line 5)
But...
• Schedule A Line 5a is the state taxes you ACTUALLY PAID
• Schedule A Line 5e is the maximum DEDUCTION you can take ($10,000)
So in the above formula, do you use 5a or 5e to computing your investment income tax?
TT uses 5a, while other software I'm comparing uses 5e.
Which is correct, and why?
