The amount of income tax you must pay is based on your taxable income. After you figure your income tax, you then subtract from it any credits you may have and add any other taxes you may owe. The result is your total tax. Finally, you compare your total tax with your total payments to determine whether you are entitled to a refund or owe additional tax.

This section provides a general outline of how to figure your tax. You can find step-by-step directions in the instructions for Forms 1040EZ, 1040A, and 1040. If you are unsure of which tax form you should file, see Which Form Should I Use? in chapter 1.

Tax. Most taxpayers use either the Tax Table or the Tax Rate Schedules to figure their income tax. However, there are special methods you may have to use for the following items.

• Capital gain income (see chapter 17).
• Investment income over $1,400 of children under age 14 (see chapter 32).
• Lump-sum distributions (see chapter 11).

Credits. After you figure your income tax, you can determine whether you can claim any tax credits. This chapter does not explain whether you are eligible for these credits. You can find that information in chapters 33 through 38 and your form instructions. Scan the credits listed in the following table to see what you may be able to subtract from your income tax.

Some credits (such as the earned income credit) are not listed above because they are treated as payments. See Payments, later.

There are other credits that are not discussed in this publication. These include the following items.

• General business credit, which is made up of a number of separate business-related credits. These generally are reported on Form 3800, General Business Credit, and are discussed in chapter 4 of Publication 334.
• Empowerment zone employment credit, which is for certain employers whose employees work and live in an empowerment zone. See the instructions for Form 8844, Empowerment Zone Employment Credit.
• District of Columbia first-time homebuyer credit, which is for certain persons who buy a main home in the District. See the instructions for Form 8859, District of Columbia First-Time Homebuyer Credit.
• Credit for fuel from a nonconventional source, which is for the person who sold the fuel. See the instructions for line 48 of Form 1040 and Internal Revenue Code section 29.

Other taxes. After you determine whether you have any tax credits, you must determine if there are any other taxes you must pay. This chapter does not explain whether you must pay these other taxes. You can find that information in other chapters of this publication and your form instructions. Scan the taxes listed in the following table to see what you may need to add to your income tax.

Another tax you may have to pay, the alternative minimum tax, is discussed later in this chapter.

There are other taxes that are not discussed in this publication. These include the following items.

1. Self-employment tax. You must figure this tax if either of the following applies to you (or your spouse if you file a joint return):
   1. You were self-employed and your net earnings from self-employment from other than church employee income were $400 or more, or
   2. You had church employee income of $108.28 or more.

   See the instructions for Schedule SE (Form 1040) and Publication 533, Self-Employment Tax.

2. Recapture taxes. You may have to pay these taxes if you previously claimed an investment tax credit, a low-income housing credit, a mortgage interest credit, a qualified electric vehicle credit, or an Indian employment credit. See the instructions for line 56 of Form 1040.
3. Section 72(m)(5) excess benefits tax. If you are (or were) a 5% owner of a business and you received a distribution that exceeds the benefits provided for you under the qualified pension or annuity plan formula, you may have to pay this additional tax. See Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Keogh Plans).
4. Uncollected social security and Medicare tax on group-term life insurance. If you quit or retired from your job and your former employer provided you with more than $50,000 of group-term life insurance coverage, this tax applies to you. Former employees must pay the employee part of social security and Medicare taxes on those premiums with Form 1040. See the instructions for line 56 of Form 1040.
5. Tax on golden parachute payments. This tax applies if you, as a key employee, received an "excess parachute payment" (EPP) due to a change in a corporation's ownership or control. See the instructions for line 56 of Form 1040.
6. Tax on accumulated distribution of trusts. This applies if you are the beneficiary of a trust that accumulated its income instead of distributing it currently. See the instructions for Form 4970, Tax on Accumulation Distribution of Trusts.
7. Additional tax on MSAs. If amounts contributed to, or distributed from, your medical savings account do not meet the rules for these accounts, you may have to pay additional taxes. See Publication 969, Medical Savings Accounts, and Forms 8853, Medical Savings Accounts and Long-Term Care Insurance Contracts, and 5329, Additional Taxes Attributable to IRAs, Other Qualified Retirement Plans, Annuities, Modified Endowment Contracts, and MSAs.

Payments. After you determine whether you owe any other taxes, you must figure the total payments you have already made for the year. Include credits that are treated as payments (listed in the following table or the discussion that follows the table). This chapter does not explain these payments and credits. You can find that information in other chapters of this publication and your form instructions. Scan the following table to see what amounts you can include in your total payments.

Another credit that is treated as a payment is the credit for federal excise tax paid on fuels. This credit is for persons who have a nontaxable use of certain fuels, such as diesel fuel and kerosene. It is claimed on line 63 of Form 1040. See Publication 378, Fuel Tax Credits and Refunds, and Form 4136, Credit for Federal Tax Paid on Fuels.

Refund or balance due. By comparing your total payments with your total tax, you determine whether you are entitled to a refund or owe additional tax. If you are entitled to a refund, see your form instructions for information on having it directly deposited into your financial account instead of receiving a paper check.

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