What the Form Is For

Schedule 2 is a supplemental form that works alongside the main Form 1040. Think of it as an extra page where you report certain "additional taxes" that don't fit on the main form. Starting in 2018, the IRS redesigned Form 1040 using a "building block" approach—the main form became simpler, and several new numbered schedules (1 through 6) were created to handle specific situations. Schedule 2 is specifically for reporting two types of additional taxes that relatively few taxpayers owe.

The two taxes reported on Schedule 2 for 2018 are:

• Alternative Minimum Tax (AMT) – A parallel tax system designed to ensure that people who benefit from certain deductions and credits still pay a minimum amount of tax. If your situation triggers AMT calculations (through items like incentive stock options, private activity bond interest, or significant itemized deductions), you'll report the additional tax here.
• Excess Advance Premium Tax Credit Repayment – If you or your family received advance payments of the premium tax credit to help pay for health insurance through the Health Insurance Marketplace, and it turns out you received more assistance than you were entitled to based on your actual income, you must repay the excess amount here.

Most taxpayers won't need Schedule 2 at all. You'll only complete it if you're specifically liable for one or both of these taxes. IRS.gov

When You'd Use It (Including Late and Amended Filings)

Original Filing

You would attach Schedule 2 to your 2018 Form 1040 when you file by the original deadline (April 15, 2019—or April 17, 2019, for residents of Maine and Massachusetts due to state holidays). If you determine through Form 6251 that you owe Alternative Minimum Tax, or if Form 8962 shows you must repay excess premium tax credit, you must include Schedule 2 with your return.

Extension Situations

If you filed for an automatic six-month extension using Form 4868, you would still attach Schedule 2 when you file your completed return by October 15, 2019 (or October 17, 2019, for Maine/Massachusetts). Remember that an extension to file is not an extension to pay—any taxes owed (including AMT or premium credit repayment) are due by the original April deadline to avoid interest and penalties.

Amended Returns

If you discover after filing your 2018 return that you should have reported AMT or excess premium tax credit repayment (or if you made errors in calculating these amounts), you would file Form 1040-X (Amended U.S. Individual Income Tax Return) with a corrected Schedule 2 attached. The IRS updated 2018 forms and instructions in 2019 due to retroactive legislation (the Taxpayer Certainty and Disaster Tax Relief Act of 2019), so some taxpayers needed to file amended returns to claim certain extended tax benefits or correct calculations affected by this law.

Late Filing

If you missed the deadline entirely and are filing late, you must still include Schedule 2 if you owe these additional taxes. Late filing can result in failure-to-file penalties (typically 5% of unpaid taxes per month, up to 25%), plus interest on any unpaid amounts. However, if you're owed a refund and filing late, there's generally no penalty for late filing—but you'll want to file within three years to claim that refund. IRS.gov

Key Rules or Details for 2018

AMT Exemption Increases

For 2018, the AMT exemption amounts were substantially increased: $70,300 for single filers, $109,400 for married filing jointly, and $54,700 for married filing separately. The income levels where these exemptions begin phasing out also increased to $500,000 ($1,000,000 for joint filers). These increases meant fewer people owed AMT in 2018 compared to prior years—the changes were specifically designed to reduce the number of middle-income taxpayers caught by the AMT.

AMT Tax Brackets

The AMT uses a two-tier rate structure. For 2018, the 26% rate applied to the first $191,100 of taxable excess ($95,550 if married filing separately), and the 28% rate applied to amounts above that threshold.

Premium Tax Credit Reconciliation

If you or family members had Marketplace health insurance coverage in 2018 with advance premium tax credits, you must reconcile on Form 8962 regardless of your income level. The Marketplace should have sent Form 1095-A (typically by early February 2019) with details about your coverage and advance payments. This reconciliation is mandatory—failure to file Form 8962 when required can delay your refund and cause processing issues.

Repayment Caps

For excess premium tax credit repayment, there are caps on how much you must repay based on your household income as a percentage of the federal poverty line. These caps protect lower-income taxpayers from having to repay the full excess amount.

No Personal Exemptions

Remember that for 2018, personal exemptions were suspended (previously $4,050 per person). This affected AMT calculations since personal exemptions were one of the AMT preference items in prior years. IRS.gov

Step-by-Step (High Level)

Here's the basic process for completing Schedule 2:

Step 1: Determine If You Need the Schedule

Review your tax situation. Do you have items that might trigger AMT (incentive stock options, significant state tax deductions, private activity bond interest, depreciation differences)? Did you receive advance premium tax credits for Marketplace health insurance? If neither situation applies, you don't need Schedule 2.

Step 2: Calculate Alternative Minimum Tax (Line 45)

If you might owe AMT, start with the worksheet provided in the Form 1040 instructions (called "Worksheet To See if You Should Fill in Form 6251"). This worksheet helps you determine whether you need to complete the full Form 6251. If the worksheet indicates you may owe AMT—or if you have any of the specific items listed in the instructions (like accelerated depreciation, ISO exercises, investment interest, etc.)—complete Form 6251 in full. Enter the AMT amount from Form 6251, line 11, onto Schedule 2, line 45. Attach Form 6251 to your return.

Step 3: Calculate Excess Premium Tax Credit (Line 46)

If you had Marketplace coverage with advance credits, complete Form 8962 using information from Form 1095-A. Form 8962 compares your actual allowed premium tax credit (based on your final income and family size) with the advance payments made during the year. If advance payments exceeded what you're entitled to, Form 8962, line 29 shows the repayment amount. Enter this amount on Schedule 2, line 46. Attach Form 8962 to your return (but not Form 1095-A).

Step 4: Total the Amounts (Line 47)

Add lines 45 and 46 together. Enter the total on line 47 of Schedule 2.

Step 5: Transfer to Form 1040

Enter the amount from Schedule 2, line 47, in the entry space on Form 1040, line 11b, and check the box indicating you're attaching Schedule 2. This adds your additional taxes to your total tax liability.

Step 6: Attach the Schedule

Place Schedule 2 behind your Form 1040, following the "attachment sequence number" printed on the form (Schedule 2 is sequence number 02). Also attach Forms 6251 and/or 8962 if you completed them. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Not Filing Schedule 2 When Required

Some taxpayers complete Form 6251 or Form 8962 but forget to transfer the amounts to Schedule 2 and attach it. The IRS computer systems expect these amounts on Schedule 2 when the supporting forms are present. Always double-check that you've included Schedule 2 if you completed Form 6251 or Form 8962. The IRS will likely correct this error, but it delays processing.

Mistake #2: Using Old AMT Exemption Amounts

The 2018 exemptions increased significantly from 2017. Some taxpayers or older software might use outdated figures. Always verify you're using the correct 2018 amounts: $70,300/$109,400/$54,700 depending on filing status.

Mistake #3: Skipping Form 8962 Entirely

If advance premium tax credits were paid on your behalf, you must file Form 8962 even if you don't owe a repayment. The form might show you're entitled to additional credit, which would go on Schedule 3 instead of Schedule 2. Failing to file Form 8962 when advance payments were made can trigger IRS notices and delayed refunds.

Mistake #4: Incorrectly Completing the AMT Worksheet

The worksheet requires careful attention to whether you're itemizing deductions. If you take the standard deduction, several lines don't apply. Follow the "if yes, then..." and "if no, skip to..." instructions precisely. When in doubt, complete the full Form 6251 instead—it's more comprehensive and reduces errors.

Mistake #5: Using Wrong Filing Status on Form 8962

Your filing status on Form 8962 must match your Form 1040. Using inconsistent filing statuses (perhaps because your situation changed during the year) causes calculation errors and reconciliation problems. If you changed status mid-year (marriage, divorce, death of spouse), pay special attention to the Form 8962 instructions for these situations.

Mistake #6: Not Attaching Required Forms

Schedule 2 is a summary schedule—it reports totals calculated elsewhere. You must attach Form 6251 if you're reporting AMT, and Form 8962 if you're reporting excess premium tax credit. Missing these supporting forms will trigger IRS correspondence requesting the documentation.

Mistake #7: Math Errors

Always double-check that Schedule 2, line 47 (the total) correctly adds lines 45 and 46, and that this total appears on Form 1040, line 11b. E-filing catches most math errors automatically, but paper filers should carefully verify all calculations. IRS.gov

What Happens After You File

Processing Your Return

When the IRS receives your return with Schedule 2, their systems verify that the amounts on Schedule 2 match the attached Forms 6251 and/or 8962. The Schedule 2 total is added to your other taxes on Form 1040, line 11, contributing to your total tax liability. This affects whether you owe additional tax or receive a refund.

Refund Timing

If you're expecting a refund, Schedule 2 doesn't typically cause delays if everything is correctly completed and all required forms are attached. Most e-filed returns with direct deposit are processed within 21 days. However, returns with errors, missing forms, or inconsistencies—especially related to premium tax credit reconciliation—may take longer to process, sometimes requiring manual review.

Potential IRS Correspondence

If the IRS identifies discrepancies, you might receive:

• CP2000 Notice: This is a proposed adjustment notice if the IRS's records don't match what you reported. For example, if Form 1095-A shows different advance payment amounts than what you reported on Form 8962.
• Mathematical Error Notices: If there are calculation errors on Schedule 2, Form 6251, or Form 8962, the IRS will correct them and send a notice explaining the changes.
• Missing Form Letters: If you indicated you owe AMT or excess premium credit repayment but didn't attach the required supporting forms.

Premium Tax Credit Implications

If you had to repay excess advance premium tax credit on Schedule 2, this may affect your eligibility for advance credits in future years. The Marketplace uses your most recently filed tax return to estimate your eligibility for the upcoming year. Consider updating your Marketplace application if your income or family situation changed.

AMT Credit Carryforward

If you paid AMT in 2018, you may be entitled to a minimum tax credit in future years when you're not subject to AMT. This credit appears on Form 8801 in subsequent years. Keep good records of your 2018 Form 6251 to track this.

State Tax Impact

Most states don't have AMT or premium tax credit systems that match the federal versions, but your federal Schedule 2 amounts may still affect your state return in indirect ways (through federal taxable income differences). Check your state's specific rules. IRS.gov

FAQs

Q1: I exercised incentive stock options in 2018 but didn't sell the stock. Do I need Schedule 2?

Yes, very likely. When you exercise incentive stock options (ISOs) and hold the stock beyond the calendar year, you create an AMT adjustment equal to the difference between the exercise price and fair market value. This "bargain element" must be reported on Form 6251, which typically results in AMT liability. You would report this AMT on Schedule 2, line 45. Keep careful records of your ISO exercises, as this creates a different cost basis for AMT purposes versus regular tax purposes.

Q2: What if I received Form 1095-A but didn't actually receive advance premium tax credits—do I still need Form 8962 and Schedule 2?

Check Form 1095-A carefully, specifically column C (monthly advance payment amounts). If all entries in column C are zero, no advance payments were made, and you don't have a repayment obligation. However, you might still be eligible to claim the premium tax credit (which would go on Schedule 3, not Schedule 2). If any month shows an advance payment amount, you must file Form 8962 to reconcile. The reconciliation might show zero repayment, or might even show you're entitled to additional credit.

Q3: I lived in multiple states in 2018 and had high state tax deductions. How do I know if I owe AMT?

Start with the worksheet in the Form 1040 instructions. One common AMT trigger is state and local tax deductions, which aren't allowed for AMT purposes. For 2018, there's also a $10,000 cap on state and local tax deductions for regular tax purposes, which reduced AMT impact for many people. If the worksheet indicates you might owe AMT, complete Form 6251. The form walks you through adding back state tax deductions and other preference items to calculate tentative minimum tax, then compares it to your regular tax to determine if you owe additional AMT.

Q4: Can I avoid repaying excess premium tax credit by not filing a tax return?

No. If advance payments were made for Marketplace coverage for you, your spouse, or dependents, you are legally required to file a tax return and Form 8962 to reconcile those payments—even if your income is below the normal filing threshold. Failing to file can result in being unable to receive advance credits in future years, and the IRS can assess penalties and interest on the unpaid repayment amount.

Q5: I made estimated tax payments during 2018. Do these cover the Schedule 2 taxes?

Yes, if you paid sufficient estimated taxes during the year. Your estimated tax payments (and withholding) go toward your total tax liability, which includes regular tax, Schedule 2 additional taxes, and any other taxes you owe. The payments are reported on Form 1040, lines 16-18, and compared against your total tax (including Schedule 2 amounts) to determine if you owe more or get a refund. If you expect to owe AMT again in 2019, adjust your estimated payments accordingly.

Q6: What's the difference between Schedule 2 and Schedule 4? Both seem to be about "additional taxes."

Both schedules deal with taxes beyond the main Form 1040 calculation, but they cover different categories. Schedule 2 (for 2018) handles AMT and excess premium tax credit repayment. Schedule 4 handles self-employment tax, household employment taxes, additional Medicare tax, net investment income tax, and several other specific taxes. Think of it this way: Schedule 2 is for two specific additional taxes, while Schedule 4 is the catch-all for various other taxes that don't fit elsewhere.

Q7: I'm filing married filing separately. Are there special rules for Schedule 2?

Yes, particularly for AMT. Married filing separately status has the lowest AMT exemption ($54,700 in 2018) and the exemption phases out at $500,000—the same threshold as single filers. For premium tax credit repayment, if you file married filing separately, you generally cannot claim the premium tax credit unless you meet specific criteria (lived apart from your spouse for the last six months of the year, or are a victim of domestic abuse). The Form 8962 instructions have detailed rules for married filing separately filers. IRS.gov

Official IRS Resources

• 2018 Form 1040 Instructions
• 2018 Schedule 2 Form
• 2018 Form 6251 Instructions
• 2018 Form 8962 Instructions