I’m beginning to wonder if IRS, trying to read the minds of Congress, screwed that one up also.
The recently-enacted amendment to Section 85 (making unemployment taxable) says:
“-For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined--
(A) after application of sections 86, 135, 137, 219, 221,
222, and 469, . . .”
But paragraph 1 just says,
“if the adjusted gross income of the taxpayer for such taxable year is less than $150,000, the gross income of such taxpayer shall not include so much of the unemployment compensation received by such taxpayer (or, in the case of a joint return, received by each spouse) as does not exceed $10,200.”
So that list of items that need to be “applied” only relates to the computation of whether the $150,000 limit has been exceeded.
It doesn’t say to make that adjustment for any other purpose, like figuring actual AGI.
On the other hand, the law also amended Code Section 86, which tells you how to compute the taxable part of Social Security. That code section doesn't take into account the deductions for student loan interest and tuition, which also depend on AGI. Now, it doesn't take into account the adjustment from excluding unemployment. So maybe the program is right, but the Worksheet in the 1040 instructions has not been changed, so people doing their own return may not get the correct answer.
