Turbo Tax appears to enter wrong tax amount

[revscox]

After completing my tax return, I reviewed it and found that Turbo Tax had entered the amount of my solar credit on line 16 of the 1040 instead of entering the tax. It then entered the same amount for my tax credit on Line 20 of the 1040, leaving me with $0 tax. Based on the 2023 tax tables, my tax should have been more than my maximum tax credit.  Am I reading this incorrectly, or do others have a similar problem?

[DawnC]

Line 16 of your Form 1040 is your tax.   Your nonrefundable Solar Credit goes to line 5a of Schedule 3.   Those credits are subtracted from your tax on Line 20 of Form 1040.   The portion you could not claim this year can be carried over to next year.   You can find your carry over amount on Form 5695, Line 16.  

[revscox]

Thanks. I am aware of everything in your explanation. I tried my return in a different tax software and got the same answer, so I knew that I was missing something.  The simple answer was that I failed to take my qualified dividends into account for figuring the tax on line 16.

[DawnC · Accepted solution]

Qualified Dividends are taxed differently than ordinary income.   On your Form 1040 Wks, look between lines 15 and 16 - there is a Tax Smart Worksheet that will tell you if your tax was computed using the tax tables or another worksheet.  Look for the X on that worksheet, which is part of your 1040 worksheet.   

• Your “qualified” dividends may be taxed at 0% if your taxable income falls below $44,625 (if single or Married Filing Separately), $59,750 (if Head of Household), or $89,250 (if (Married Filing Jointly or qualifying widow/widower) (tax year 2023).
• Above those thresholds, the qualified dividend tax rate is 15%.
• The qualified dividend tax rate increases to 20% if your taxable income exceeds $276,925 (if Married Filing Separately), $492,300 (if single), $523,050 (if head of household) or $553,850 (if Married Filing Jointly or qualifying widow/widower) (tax year 2023).
• Non-qualified or “ordinary” dividends are taxed using the standard income tax brackets for tax year 2023.

[VolvoGirl · Accepted solution]

It depends on what kind of income you have.  There are like 7 different ways to figure the tax.

See the IRS worksheet on 1040 page 36 for how the tax is figured.  Turbo Tax uses the same worksheet.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Even though it shows up as income on the first page,if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet.  It does not get filed with your return.

In the online version you need to save your return as a pdf file and include all worksheets to see it.

For the Desktop version you can switch to Forms Mode and open the worksheet to see it.  Click Forms in the upper right (upper left for Mac) and look through the list and open the Qualified Dividends and Capital Gain Tax Worksheet.

You can probably tell because the tax on 1040 will be less than the Tax Table

https://ttlc.intuit.com/community/forms/help/form-1040-line-11-amount-is-less-than-standard-irs-tax-...

[revscox]

Thanks, again, for your detailed answer!