unearned income means the excess of— (i) the portion of the adjusted gross income for the taxable year which is not attributable to earned income (as defined in section 911(d)(2)), over (ii) the sum of— (I) the amount in effect for the taxable year under section 63(c)(2)(A) (relating to limitation on standard deduction in the case of certain dependents), plus (II) The greater of the amount described in subclause (I) or, if the child itemizes his deductions for the taxable year, the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause (i). (B) Limitation based on taxable income The amount of the net unearned income for any taxable year shall not exceed the individual’s taxable income for such taxable year. (e) Phaseout of 12-percent rate (1) In general The amount of tax imposed by this section (determined without regard to this subsection) shall be increased by 6 percent of the excess (if any) of— (A) adjusted gross income, over (B) the applicable dollar amount. (2) Limitation The increase determined under paragraph (1) with respect to any taxpayer for any taxable year shall not exceed 27.6 percent of the lesser of— (A) the taxpayer’s taxable income for such taxable year, or (B) the 25-percent bracket threshold amount in effect with respect to the taxpayer for such taxable year. (3) Applicable dollar amount For purposes of this subsection, the term applicable dollar amount means— (A) in the case of a joint return or a surviving spouse, $1,200,000, (B) in the case of a married individual filing a separate return, an amount equal to 1/2 of the amount in effect for the taxable year under subparagraph (A), and (C) in the case of any other individual, $1,000,000. (4) Estates and trusts Paragraph (1) shall not apply in the case of an estate or trust. . (b) Application of current income tax brackets to capital gains brackets (1) In general (A) 0 -percent capital gains bracket Section