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"Your net tax liability is the tax for which you are responsible, after
all non-refundable tax credits have been applied. Your net tax liability is
found on the line called total tax on your tax form. On the 2005 tax
forms, this is found on Form 1040 Line 63, Form 1040A Line 38, and Form 1040EZ
Line 10. Your withholding is a prepayment against this tax liability, and any
excess withholding is refunded to you as a tax refund." -- from
Tax Credits - Preparing Your 1040 Step 7
by William Perez, About.com.
A different definition of the term is used to compute the amount of the
tax rebate.
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According to
IRS documents
Net Tax Liability = line 57 + line 52
line 52 = Child Tax Credit (CTC)
line 57 = line 46 - line 42
line 42 = total Nonrefundable Credits (totNRC)
line 46 = line 44 + line 45
line 44 = Tax (calculated from line 43)
line 43 = Taxable Income
line 45 = AMT
So Net Tax Liability = Tax + AMT - totNRC + CTC
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What does all this mean?
- Net
Tax Liability is Tax + AMT - totNRC without the CTC
- If Tax + AMT = 0 then both
totNRC and CTC will be 0
- If the only
NRC is the CTC so that totNRC=CTC,
then
Net Tax Liability = Tax + AMT
- The EIC, Additional Child Tax Credit do
not reduce the Net Tax Liability
- Other Taxes, such as Self-Employment
Tax, Household employment tax are not considered part of Net Tax
Liability
- Line 63, Total Tax = Tax + AMT
+ Other Taxes is described as Net Tax Liability in
the article above.
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