Form 1040 Schedule 2: Additional Taxes (2018) – A Complete Guide for Taxpayers

What Form 1040 Schedule 2 Is For

Schedule 2 (Form 1040) is a one-page supplemental tax form used to report additional taxes that cannot be entered directly on the main Form 1040. The 2018 tax year marked the first time this schedule was used, as part of a major redesign of Form 1040 that eliminated the old 1040A and 1040EZ versions in favor of a simplified base form with numbered schedules.

This schedule specifically handles two types of additional tax liabilities: Alternative Minimum Tax (AMT) and excess advance premium tax credit repayment related to health insurance purchased through the Health Insurance Marketplace. The form consists of lines 38 through 47, though lines 38-44 are marked ""Reserved"" for 2018, meaning those entries go directly on the main Form 1040. Only lines 45, 46, and 47 are actually used on Schedule 2 for the 2018 tax year.

Line 45 reports Alternative Minimum Tax, which is a parallel tax system designed to ensure that taxpayers with certain deductions, credits, or types of income pay at least a minimum amount of tax. Line 46 captures any excess advance premium tax credit repayment owed when health insurance subsidies received during the year exceeded what you were actually entitled to receive. Line 47 totals these amounts, and that total flows to Form 1040, line 11b.

Most taxpayers will not need to file Schedule 2. You only attach this schedule to your return if you actually owe one or both of these additional taxes. If neither situation applies to you, you can file Form 1040 without Schedule 2 attached.

When You’d Use Form 1040 Schedule 2 (Including Late or Amended Returns)

Filing Late Returns

If you're filing a 2018 tax return after the original April 15, 2019 deadline (or April 17, 2019 for Maine and Massachusetts residents), you'll still use the same 2018 version of Schedule 2 if you owe AMT or excess premium tax credit repayment. Late filing can trigger significant penalties—typically 5% of unpaid taxes for each month or part of a month your return is late, up to a maximum of 25%, with a minimum penalty of $510 if your return is more than 60 days late. However, these penalties only apply if you owe taxes; if you're due a refund, there's no penalty for filing late, though you must file within three years of the original due date to claim your refund.

For 2018 returns specifically, the deadline to claim any refund was April 18, 2022 (three years from the extended due date). After that date, unclaimed refunds become the property of the U.S. Treasury. If you're filing a past-due 2018 return now, you can still file it to establish compliance or satisfy IRS requirements, but any refund has expired. You'll still need to include Schedule 2 if either tax applies.

Filing Amended Returns

If you've already filed your 2018 Form 1040 but later discover you owe AMT or excess premium tax credit repayment that you didn't originally report, you must file an amended return using Form 1040-X. You'll attach a corrected Schedule 2 to your amended return showing the additional taxes owed. Conversely, if you originally included Schedule 2 but later determine you don't actually owe one of these taxes, you can file Form 1040-X to claim a refund.

For amended returns claiming a refund, you generally must file within three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. For 2018 returns filed on time in April 2019, the deadline to file an amended return for a refund was April 2022. If you're amending to pay additional tax owed, there's no time limit, though you'll owe interest from the original due date.

You can now electronically file Form 1040-X for 2018 and other recent years, which is faster than paper filing. Make sure to attach the corrected Schedule 2 and any supporting forms like Form 6251 or Form 8962 to your electronic or paper amended return.

Key Rules and Details for 2018

Alternative Minimum Tax (Line 45)

The AMT is a separate tax calculation that adds back certain deductions and applies different rates. For 2018, Congress significantly increased the AMT exemption amounts and phaseout thresholds as part of tax reform, which meant fewer taxpayers were subject to AMT compared to previous years. The 2018 exemption amounts are $70,300 for single filers and married filing separately, $109,400 for married filing jointly or qualifying widow(er), and $54,700 for married filing separately. These exemptions begin to phase out at $500,000 of alternative minimum taxable income ($1,000,000 for married filing jointly).

You must use Form 6251 to calculate AMT if you have any of the following situations: accelerated depreciation, tax-exempt interest from private activity bonds, intangible drilling costs, income from tax-shelter farm activities or passive activities, exercised incentive stock options that you didn't sell in the same year, certain general business credits, or net qualified disaster loss. Even if none of these apply, you should complete a worksheet to determine whether you owe AMT. The worksheet is found in the Form 1040 instructions and provides a simplified calculation method for straightforward situations.

Children under age 24 at the end of 2018 may have special AMT filing requirements—consult the Form 6251 instructions for details.

Excess Advance Premium Tax Credit Repayment (Line 46)

If you, your spouse, or a dependent enrolled in health insurance through the Health Insurance Marketplace (also called the Exchange) and received advance payments of the premium tax credit, you must reconcile these payments when you file your return. The Marketplace sends Form 1095-A showing the amount of advance credit payments made to your insurance company on your behalf.

You must file Form 8962 to compare the advance payments to the actual premium tax credit you're entitled to claim based on your final income for the year. If the advance payments exceeded your actual credit, you must repay the excess—though there are caps on repayment amounts depending on your income and filing status. The repayment amount from Form 8962, line 29, goes on Schedule 2, line 46.

This requirement applies even if someone else enrolled you in Marketplace coverage—if advance payments were made on your behalf, you're responsible for reconciling them. If you don't file Form 8962 when required, the IRS may deny your premium tax credit and assess additional tax.

Attaching Schedule 2

When you complete Schedule 2, you must check the box on Form 1040, line 11b, to indicate you're attaching the schedule. Enter the total from Schedule 2, line 47, on Form 1040, line 11b. This amount increases your total tax liability.

Step-by-Step (High Level)

Step 1: Determine If You Need Schedule 2

Review your tax situation to see if either of these applies:

• You may owe AMT because you have significant deductions for state and local taxes, large families with many exemptions (though personal exemptions were suspended for 2018), exercised incentive stock options, or other AMT preference items
• You or a family member had Marketplace health insurance with advance premium tax credit payments

If neither applies, you don't need Schedule 2.

Step 2: Calculate Alternative Minimum Tax (If Applicable)

Start with the AMT worksheet in the Form 1040 instructions. If you answer yes to certain questions about having AMT adjustments or preference items, you must instead complete Form 6251. Form 6251 requires you to recalculate your taxable income using AMT rules, subtract the appropriate exemption amount (considering the phaseout), apply the AMT tax rates, and compare the result to your regular tax. If the AMT is higher, you owe the difference, which goes on Schedule 2, line 45.

Step 3: Calculate Excess Premium Tax Credit Repayment (If Applicable)

Using Form 1095-A from the Marketplace, complete Form 8962. This form walks you through comparing your advance credit payments (from Form 1095-A, column C) to your actual allowable premium tax credit based on your household income and family size. If the advance payments were more than your allowable credit, the difference is your repayment amount. Enter this from Form 8962, line 29, on Schedule 2, line 46. Note that repayment caps may limit how much you must repay.

Step 4: Complete Schedule 2

On Schedule 2:

• Enter your name and Social Security number at the top
• Skip lines 38-44 (reserved)
• Enter AMT from Form 6251 or the worksheet on line 45 (enter zero if none)
• Enter excess premium tax credit repayment from Form 8962, line 29, on line 46 (enter zero if none)
• Add lines 45 and 46, enter the total on line 47

Step 5: Transfer to Form 1040

Enter the amount from Schedule 2, line 47, on Form 1040, line 11b. Check the box on line 11b to indicate Schedule 2 is attached. Attach Schedule 2 to your return along with Form 6251 and/or Form 8962 if you used them.

Common Mistakes and How to Avoid Them

Forgetting to Use Form 6251 When Required

Many taxpayers try to use the simplified AMT worksheet even when they have situations that require Form 6251. If you have any of the exception items listed in the instructions—such as incentive stock options, private activity bond interest, or certain credits—you must use Form 6251 instead. Using the worksheet when you should use Form 6251 will result in an incorrect AMT calculation. Always review the list of exceptions carefully before deciding which method to use.

Not Reconciling Premium Tax Credit

A frequent error occurs when taxpayers don't realize they need to file Form 8962 because someone else enrolled them in Marketplace coverage or they didn't keep their Form 1095-A. You are required to reconcile advance payments even if a parent, spouse, or other person signed you up for insurance. Contact the Marketplace to get a copy of Form 1095-A if you didn't receive it or lost it. Failing to reconcile can result in IRS delays, denied credits, and potential future restrictions on receiving advance payments.

Failing to Attach Supporting Forms

Schedule 2 by itself is incomplete—you must also attach Form 6251 if you owe AMT or Form 8962 if you're repaying excess premium tax credit. Don't just enter numbers on Schedule 2 without including the supporting calculations. The IRS may question your return or delay processing if the supporting forms are missing.

Not Checking the Box on Form 1040

When you attach Schedule 2, you must check the box on Form 1040, line 11b. This signals to the IRS that additional schedules are attached. If you forget to check this box, it may cause processing delays even if you attached the schedule correctly.

Assuming You Don't Owe AMT

The 2018 tax reform reduced the number of taxpayers subject to AMT, but it didn't eliminate it. Don't assume you're exempt. Common situations that still trigger AMT include exercising incentive stock options, having large deductions for state and local taxes (especially in high-tax states where the new $10,000 cap increases AMT exposure), or claiming certain tax credits. Always complete the worksheet or Form 6251 to verify.

Incorrect Repayment Calculations

When completing Form 8962, make sure you're using the correct household income figure from Form 1040, line 7a. Even small changes in income can significantly affect your premium tax credit calculation. Also verify you're applying the correct repayment caps from the Form 8962 instructions—these caps limit how much you must repay based on your income level.

What Happens After You File

Processing Timeline

If you electronically file your 2018 Form 1040 with Schedule 2 attached, the IRS typically processes the return within 21 days. Paper returns take much longer—typically six weeks or more. Returns requiring Schedule 2 may take additional time because they involve more complex tax calculations that may require manual review.

Refunds and Payments

If Schedule 2 increases your tax liability and you owe money, you must pay by the return's due date (generally April 15, 2019, for 2018 returns) to avoid interest and penalties. If you've already paid through withholding or estimated payments, Schedule 2 may reduce your refund or turn an expected refund into a balance due. You can check your refund status using the IRS ""Where's My Refund?"" tool at IRS.gov starting 24 hours after e-filing.

IRS Review

The IRS may select your return for additional review, especially if you're claiming AMT for the first time or if there are inconsistencies between your Schedule 2 and supporting forms. You may receive a notice asking for clarification or additional documentation. Common requests include verification of incentive stock option exercises (IRS wants to see Forms 3921 from your employer) or proof of Marketplace enrollment (Form 1095-A).

Notices and Corrections

If the IRS finds an error in your AMT calculation or premium tax credit reconciliation, you'll receive a notice proposing changes. You typically have 30 to 60 days to respond, either agreeing with the changes or providing additional information to support your original return. Don't ignore IRS notices—respond promptly to avoid additional penalties and collection actions.

Future Year Implications

If you pay AMT in 2018, you may be eligible for an AMT credit in future years when your regular tax exceeds your tentative minimum tax. This credit allows you to recapture AMT paid on timing differences. Keep your 2018 Form 6251 and consider filing Form 8801 in future years to claim this credit. Similarly, if you repay excess premium tax credit in 2018, it may affect your eligibility for advance payments in future years—update your Marketplace application promptly when your income or family situation changes.

FAQs

Do I need Schedule 2 if I only received Form 1095-A but didn't get advance payments?

If no advance payments were made (column C on Form 1095-A shows zero), you may still need to file Form 8962 to claim the premium tax credit you're entitled to, but that credit goes on Schedule 3, not Schedule 2. Schedule 2 is only for repaying excess advance payments. However, you must still file Form 8962 even if advance payments were zero—it's required whenever anyone in your household had Marketplace coverage. If Form 8962 shows you're entitled to additional credit, you claim it on your return, and if it shows you owe repayment, that goes on Schedule 2, line 46.

Can I avoid AMT by taking the standard deduction instead of itemizing?

Not necessarily. While the AMT calculation doesn't allow the standard deduction at all, the 2018 tax reform significantly increased both the standard deduction and the AMT exemption amounts, which helps. However, AMT can be triggered by factors other than itemized deductions, such as incentive stock options, private activity bond interest, or certain business activities. Taking the standard deduction may reduce your likelihood of owing AMT but doesn't guarantee you'll avoid it. Always complete the AMT worksheet or Form 6251 to be certain.

What if I didn't receive Form 1095-A from the Marketplace?

You must contact the Marketplace (Healthcare.gov or your state exchange) to request a copy. The Marketplace is required to send Form 1095-A by January 31 following the coverage year, but if you moved, changed addresses, or the form was lost, you need to obtain a replacement. Don't estimate the numbers—incorrect information on Form 8962 will cause problems. You can typically download Form 1095-A from your Marketplace account online or call the Marketplace call center to request it be resent.

I exercised incentive stock options in 2018 but didn't sell the shares. Do I owe AMT?

Quite possibly. Exercising incentive stock options (ISOs) without selling the shares in the same year creates an AMT adjustment equal to the difference between the fair market value when you exercised and the exercise price you paid. This is considered a ""preference item"" that increases your alternative minimum taxable income but doesn't affect your regular taxable income. You must use Form 6251 to calculate your AMT—the simple worksheet cannot be used when ISOs are involved. The AMT you pay on ISO exercise may be recovered as a credit in future years when you sell the shares.

What happens if I filed Form 1040 without Schedule 2 but later realize I owe AMT?

You must file an amended return using Form 1040-X within the allowable time period. Attach Schedule 2 showing the AMT owed, along with Form 6251 showing your calculation. You'll also need to pay the additional tax plus interest calculated from the original due date of the return. The IRS charges interest on underpayments regardless of whether the error was intentional. If you discover the error before the IRS does, you'll avoid failure-to-pay penalties as long as you file the amended return and pay promptly.

My spouse enrolled our family in Marketplace insurance, but we're filing separately now. Who repays excess premium tax credit?

This situation is complex. Generally, if you were married when the coverage was obtained and someone received advance premium tax credit payments for your family, both spouses may be responsible for reconciliation. The IRS requires that when spouses file separately, each must file Form 8962 and allocate the policy amounts according to specific rules in the Form 8962 instructions. You cannot ignore the requirement just because your spouse enrolled the family—failure to reconcile will result in denied credits and potential restrictions on future Marketplace assistance. Consult the Form 8962 instructions section on allocation for married filing separately status or seek professional tax assistance for this complex situation.

Are there income limits for AMT?

There are no absolute income cutoffs below which AMT never applies, but the 2018 exemption amounts and phaseout thresholds are quite high. For 2018, the exemption begins phasing out at $500,000 for single filers and $1,000,000 for married filing jointly. Once your alternative minimum taxable income exceeds these amounts, your exemption is gradually reduced. Even moderate-income taxpayers can owe AMT if they have specific types of income or deductions that trigger it. The key is not your total income but rather the types of deductions and income items you have.

All information in this guide is based on official IRS publications and instructions available at IRS.gov. For the most current information, forms, and instructions, visit IRS.gov/Form1040.

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