taxmap/pub17/p17-193.htm#en_us_publink100035211taxmap/pub17/p17-193.htm#en_us_publink100035213Adoption credit.(p252)
The maximum adoption credit increases to $11,650. See
Adoption Credit for more information.
Recovery rebate credit.(p252)
This credit is figured like the economic stimulus payment except that your 2008 tax information is used to figure the credit, instead of your 2007 tax information. The maximum credit is $600 ($1,200 if married filing jointly) plus $300 for each qualifying child. The credit is reduced by any economic stimulus payment you received. See
Recovery Rebate Credit for more information.
First-time homebuyer credit.(p252)
You may be able to claim a credit of up to $7,500 if you are a first-time homebuyer and your modified adjusted gross income is less than $95,000 ($170,000 if married filing jointly). This credit is like a loan to you. You must recapture the amount of your 2008 credit in 15 equal yearly installments starting in 2010 (2 years after claiming the credit). See
First-Time Homebuyer Credit for more information.
Nonbusiness energy property credit not allowed for 2008.(p252)
You cannot claim the nonbusiness energy property credit for property placed in service in 2008. However, you may be able to claim it next year for property placed in service in 2009. Also, you still may be able to claim the residential energy efficient property credit for 2008. See
Residential Energy Efficient Property Credit for more information.
Excess withholding of social security tax and railroad retirement tax.(p252)
Social security tax and tier 1 railroad retirement (RRTA) tax are both withheld at a rate of 6.2% of wages. The maximum wages subject to these taxes increased to $102,000 in 2008. The withholding rate of tier 2 RRTA is 3.9% of wages in 2008. The maximum wages subject to this tax increased to $75,900 in 2008. If you had too much social security or RRTA tax withheld during 2008, you may be entitled to a credit of the excess withholding. For more information about the credit, see
Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld under
Refundable Credits, later.
This chapter discusses the following nonrefundable credits.
- Adoption credit.
- Alternative motor vehicle credit.
- Alternative fuel vehicle refueling property credit.
- Credit to holders of tax credit bonds.
- Foreign tax credit.
- Mortgage interest credit.
- Nonrefundable credit for prior year minimum tax.
- Residential energy efficient property credit.
- Retirement savings contributions credit.
This chapter also discusses the following refundable credits.
- Credit for tax on undistributed capital gain.
- First-time homebuyer credit.
- Health coverage tax credit.
- Recovery rebate credit.
- Refundable credit for prior year minimum tax.
- Credit for excess social security tax or railroad retirement tax withheld.
Several other credits are discussed in other chapters in this publication.
- Child and dependent care credit (chapter 32).
- Credit for the elderly or the disabled (chapter 33).
- Child tax credit (chapter 34).
- Education credits (chapter 35).
- Earned income credit (chapter 36).
The first part of this chapter, Nonrefundable Credits, covers nine credits that you subtract from your tax. These credits may reduce your tax to zero. If these credits are more than your tax, the excess is not refunded to you.
taxmap/pub17/p17-193.htm#en_us_publink100035218The second part of this chapter, Refundable Credits, covers six credits that are treated as payments and are refundable to you. These credits are added to the federal income tax withheld and any estimated tax payments you made. If this total is more than your total tax, the excess will be refunded to you.
taxmap/pub17/p17-193.htm#TXMP3c2a29a3Useful items
You may want to see:
Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for
Individuals 530 Tax Information for First-Time Homeowners 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116: Foreign Tax Credit (Individual, Estate, or Trust) 2439: Notice to Shareholder of Undistributed Long-Term Capital Gains 5405: First-Time Homebuyer Credit 5695: Residential Energy Efficient Property Credit 8396: Mortgage Interest Credit 8801: Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828: Recapture of Federal Mortgage Subsidy 8839: Qualified Adoption Expenses 8880: Credit for Qualified Retirement Savings Contributions 8885: Health Coverage Tax Credit 8910: Alternative Motor Vehicle Credit 8911: Alternative Fuel Vehicle Refueling Property Credit 8912: Credit to Holders of Tax Credit Bonds taxmap/pub17/p17-193.htm#en_us_publink100035219The credits discussed in this part of the chapter can reduce your tax. However, if the total of these credits is more than your tax, the excess is not refunded to you.
taxmap/pub17/p17-193.htm#en_us_publink100035220You may be able to take a tax credit of up to $11,650 for qualified expenses paid to adopt an eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses.
If your modified adjusted gross income (AGI) is more than $174,730, your credit is reduced. If your modified AGI is $214,730 or more, you cannot take the credit.
taxmap/pub17/p17-193.htm#en_us_publink100035221Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. These expenses include:
- Adoption fees,
- Court costs,
- Attorney fees,
- Travel expenses (including amounts spent for meals and lodging) while away from home, and
- Re-adoption expenses to adopt a foreign child.
.
Qualified adoption expenses do not include expenses:
- That violate state or federal law,
- For carrying out any surrogate parenting arrangement,
- For the adoption of your spouse's child,
- For which you received funds under any federal, state, or local program,
- Allowed as a credit or deduction under any other federal income tax rule,
- Paid or reimbursed by your employer or any other person or organization, or
- Paid before 1997.
The term "eligible child" means any individual:
- Under 18 years old, or
- Physically or mentally incapable of caring for himself or herself.
An eligible child is a child with special needs if all three of the following apply.
- The child was a citizen or resident of the United States (including U.S. possessions) at the time the adoption process began.
- A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home.
- The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Factors used by states to make this determination include:
- The child's ethnic background,
- The child's age,
- Whether the child is a member of a minority or sibling group, and
- Whether the child has a medical condition or a physical, mental, or emotional handicap.
Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. See the instructions for Form 8839 for more specific information on when to take the credit.
taxmap/pub17/p17-193.htm#en_us_publink100035226If the child is not a U.S. citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final.
taxmap/pub17/p17-193.htm#en_us_publink100035227To take the credit, you must complete Form 8839 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 53, and check box b on that line.
taxmap/pub17/p17-193.htm#en_us_publink100035228You may be able to take a credit if you place an alternative motor vehicle in service in 2008.
taxmap/pub17/p17-193.htm#en_us_publink100035229An alternative motor vehicle is a new vehicle that qualifies as one of the following four types of vehicles.
- Qualified hybrid vehicle.
- Advanced lean burn technology vehicle.
- Qualified alternative fuel vehicle.
- Qualified fuel cell vehicle.
Generally, for a qualified alternative fuel vehicle, an advanced lean burn technology vehicle, or a qualified hybrid vehicle, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification that a specific make, model, and model year vehicle qualifies for the credit and the maximum amount of the credit for which it qualifies. For an updated list of certified vehicles and the specific credit amounts for each model, go to
www.irs.gov/newsroom/article/0,,id=157557,00.html on the Internet.
In addition to the manufacturer's (or domestic distributor's) certification, the following requirements must be met to qualify for the credit:
- You placed the vehicle in service during the year;
- The original use of the vehicle began with you;
- You acquired the vehicle for your use or to lease to others, and not for resale; and
- You use the vehicle primarily in the United States.
Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification of the maximum credit allowable as explained above. However, if you purchased a qualified hybrid or advanced lean burn technology vehicle from a manufacturer who previously sold at least 60,000 of these vehicles, the amount of your credit may be reduced. Your manufacturer should give you the information you need to figure your phaseout percentage. Also see the Form 8910 instructions.
 | For Toyota and Lexus vehicles, no credit is allowed for 2008. For certain other vehicles the credit is reduced. See the Form 8910 instructions or Summary of the Credit for Qualified Hybrid Vehicles, on the Internet at www.irs.gov/newsroom/article/0,,id=157557,00.html. |
taxmap/pub17/p17-193.htm#en_us_publink100035234If the vehicle no longer qualifies for the credit, you may have to recapture part or all of the credit.
taxmap/pub17/p17-193.htm#en_us_publink100035235To take the credit, you must complete Form 8910 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c and enter "8910" on the line next to box c.
taxmap/pub17/p17-193.htm#en_us_publink100035236For more information on the credit, see the instructions for Form 8910.
taxmap/pub17/p17-193.htm#en_us_publink100035237You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2008.
taxmap/pub17/p17-193.htm#en_us_publink100035238Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used to store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into the tank.
taxmap/pub17/p17-193.htm#en_us_publink100079700Electric vehicle recharging property placed in service after October 3, 2008, is eligible for the credit. See the Form 8911 instructions for details and other property eligible for the credit.
taxmap/pub17/p17-193.htm#en_us_publink100035239For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Each property's cost must first be reduced by any section 179 deduction before figuring the credit.
taxmap/pub17/p17-193.htm#en_us_publink100035240To take the credit, you must complete Form 8911 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c and enter "8911" on the line next to box c.
taxmap/pub17/p17-193.htm#en_us_publink100035241For more information on the credit, see the instructions for Form 8911.
taxmap/pub17/p17-193.htm#en_us_publink100035242You may be able to take a credit if you are a holder of a tax credit bond. Tax credit bonds include:
- Clean renewable energy bonds, and
- Gulf tax credit bonds.
The issuers do not pay interest on these types of bonds. Instead of receiving interest, the bondholders qualify to claim a tax credit.
taxmap/pub17/p17-193.htm#en_us_publink100035245The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return.
taxmap/pub17/p17-193.htm#en_us_publink100035246Complete Form 8912 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c, and enter "8912" on the line next to box c.
taxmap/pub17/p17-193.htm#en_us_publink100035247For more information, see the instructions for Form 8912.
taxmap/pub17/p17-193.htm#en_us_publink100035248You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U.S. possession as a credit against your U.S. income tax. Or, you can deduct them as an itemized deduction (see
chapter 22).
You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U.S. tax under any of the following.
- Foreign earned income exclusion.
- Foreign housing exclusion.
- Income from Puerto Rico exempt from U.S. tax.
- Possession exclusion.
Unless you can elect not to file Form 1116 (see
Exception, later), your foreign tax credit cannot be more than your U.S. tax liability (Form 1040, line 44), multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources. See Publication 514 for more information.
Complete Form 1116 and attach it to your Form 1040. Enter the credit on Form 1040, line 50.
taxmap/pub17/p17-193.htm#en_us_publink100035251You do not have to complete Form 1116 to take the credit if all of the following apply.
- All of your foreign source gross income was passive income, which generally includes interest and dividends.
- All of your foreign source gross income and the foreign tax paid on it were reported to you on a qualified payee statement, which includes Form 1099-INT and Form 1099-DIV.
- The total of your creditable foreign taxes was not more than $300 ($600 if married filing jointly).
- You elect this procedure for the tax year.
For more details on these requirements, see the instructions for Form 1116.
taxmap/pub17/p17-193.htm#en_us_publink100035252The mortgage interest credit is intended to help lower-income individuals own a home. If you qualify, you can take the credit each year for part of the home mortgage interest you pay.
taxmap/pub17/p17-193.htm#en_us_publink100035253You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home.
taxmap/pub17/p17-193.htm#en_us_publink100035254Figure your credit on Form 8396. If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year.
If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction.
| | Certified indebtedness amount on your MCC | |
| | Original amount of your mortgage | |
taxmap/pub17/p17-193.htm#en_us_publink100035255If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. See Publication 530 for more information.
taxmap/pub17/p17-193.htm#en_us_publink100035256Your credit (after applying the limit based on credit rate) is also subject to a limit based on your tax that is figured using Form 8396. If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first.
If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit).
taxmap/pub17/p17-193.htm#en_us_publink100035257 Figure your 2008 credit and any carryforward to 2009 on Form 8396, and attach it to your Form 1040. Be sure to include any credit carryforward from 2005, 2006, and 2007.
Include the credit in your total for Form 1040, line 53, and check box a.
taxmap/pub17/p17-193.htm#en_us_publink100035258If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. You must do this even if part of that amount is to be carried forward to 2009. For more information about the home mortgage interest deduction, see
chapter 23.
If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. See Publication 523, Selling Your Home, for more information.
taxmap/pub17/p17-193.htm#en_us_publink100035260The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. This is called the alternative minimum tax.
The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax.
You may be able to take a credit against your regular tax if for 2007 you had:
- An alternative minimum tax liability and adjustments or preferences other than exclusion items,
- A minimum tax credit that you are carrying forward to 2008, or
- An unallowed qualified electric vehicle credit.
Figure your 2008 nonrefundable credit (if any), and any carryforward to 2009 on Form 8801, and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54, and check box b. You can carry forward any unused credit for prior year minimum tax to later years until it is completely used.
taxmap/pub17/p17-193.htm#en_us_publink100035263For more information about the credit, see the instructions for Form 8801.
taxmap/pub17/p17-193.htm#en_us_publink100035264You may be able to take this credit if you made energy saving improvements to your home located in the United States in 2008.
taxmap/pub17/p17-193.htm#en_us_publink100023504A home is where you lived in 2008 and may include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.
If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of such association or corporation for purposes of this credit.
taxmap/pub17/p17-193.htm#en_us_publink100096403The credit is 30% of your costs of qualified:
- Solar electric property,
- Solar water heating property,
- Fuel cell property,
- Small wind energy property, and
- Geothermal heat pump property.
This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property to the home. The credit is limited to:
- $2,000 for qualified solar electric property costs,
- $2,000 for qualified solar water heating property costs,
- $500 for each one-half kilowatt of capacity of qualified fuel cell property for which qualified fuel cell property costs are paid,
- $4,000 for qualified small wind energy property costs, and
- $2,000 for qualified geothermal heat pump property costs.
You must reduce the basis of your home by the amount of any credit allowed.
taxmap/pub17/p17-193.htm#en_us_publink100035269Complete Form 5695 and attach it to your Form 1040. Enter the credit on Form 1040, line 53, and check box c.
taxmap/pub17/p17-193.htm#en_us_publink100035270For more information on this credit, see the instructions for Form 5695.
taxmap/pub17/p17-193.htm#en_us_publink100035271You may be able to take this credit if you, or your spouse if filing jointly, made:
- Contributions (other than rollover contributions) to a traditional or Roth IRA,
- Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan,
- Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or
- Contributions to a 501(c)(18)(D) plan.
However, you cannot take the credit if either of the following applies.
- The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $26,500 ($39,750 if head of household; $53,000 if married filing jointly).
- The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1991, (b) is claimed as a dependent on someone else's 2008 tax return, or (c) was a student (defined next).
You were a student if during any part of 5 calendar months of 2008 you:
- Were enrolled as a full-time student at a school, or
- Took a full-time, on-farm training course given by a school or a state, county, or local government agency.
A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.
taxmap/pub17/p17-193.htm#en_us_publink100035274Figure the credit on Form 8880. Enter the credit on your Form 1040, line 51, or your Form 1040A, line 32, and attach Form 8880 to your return.
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