Making work pay credit.(p257)
You may be able to take this credit if you have earned income from work. The credit can be as much as $400 ($800 if married filing jointly). See Making Work Pay Credit
for more information.
Government retiree credit.(p257)
You may be able to take this credit if you received a government pension or annuity payment in 2009. However, the amount of this credit reduces any making work pay credit. See Government Retiree Credit
for more information.
The maximum adoption credit increases to $12,150. See Adoption Credit
for more information.
First-time homebuyer credit.(p257)
The credit increases to a maximum of $8,000 ($4,000 if married filing separately) for homes bought after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010). If you bought the home after November 6, 2009, you may be able to claim the credit even if you already owned a home but, in that case, the maximum credit is $6,500 ($3,250 if married filing separately). You can choose to claim the credit on your 2009 return for a main home you bought in 2010 that qualifies for the credit. You will not have to repay the credit for a home you bought in 2009 or 2010 if you use it as your main home for the entire 36-month period beginning on the purchase date. But you generally must repay any credit you claimed for a home you bought in 2008 and sold in 2009. See First-Time Homebuyer Credit
for more information.
Residential energy credits.(p257)
The nonbusiness energy property credit has been reinstated for qualified property placed in service in 2009. The credit is limited to $1,500. See Residential Energy Credits
for more information.
Electric vehicle credits.(p257)
You may be able to take a credit for:
Excess withholding of social security tax and railroad retirement tax.(p257)
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 $106,800 in 2009. The withholding rate of tier 2 RRTA is 3.9% of wages in 2009. The maximum wages subject to this tax increased to $79,200 in 2009. If you had too much social security or RRTA tax withheld during 2009, 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,
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.
- Plug-in electric drive motor vehicle credit.
- Plug-in electric vehicle credit.
- Residential energy credits.
- 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.
- Making work pay credit.
- Government retiree 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 eleven 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/p17-195.htm#en_us_publink1000174904
The second part of this chapter, Refundable Credits, covers seven 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/p17-195.htm#TXMP4d035a78
You may want to see:
Publication 502 Medical and Dental Expenses (Including the Health Coverage Tax Credit) 514 Foreign Tax Credit for
Individuals 530 Tax Information for First-Time Homeowners 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 Credits 8396: Mortgage Interest Credit 8801: Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828: Recapture of Federal Mortgage Subsidy 8834: Qualified Plug-in Electric and Electric Vehicle Credit 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 8936: Qualified Plug-in Electric Drive Motor Vehicle Credittaxmap/pub17/p17-195.htm#en_us_publink1000174905
The 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/p17-195.htm#en_us_publink1000174906
You may be able to take a tax credit of up to $12,150 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 $182,180, your credit is reduced. If your modified AGI is $222,180 or more, you cannot take the credit. taxmap/pub17/p17-195.htm#en_us_publink1000174907
Qualified 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/p17-195.htm#en_us_publink1000174912
If 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/p17-195.htm#en_us_publink1000174913
To 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 52, and check box b on that line.taxmap/pub17/p17-195.htm#en_us_publink1000174914
You may be able to take a credit if you place an alternative motor vehicle in service in 2009. taxmap/pub17/p17-195.htm#en_us_publink1000174915
An 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.
The credit is also allowed for the cost of converting a vehicle to a qualified plug-in electric drive vehicle placed in service after February 17, 2009.
Generally, 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.
Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification of the maximum credit allowable. However, the credit for converting a vehicle to a qualified plug-in electric drive vehicle is the smaller of (a) $4,000, or (b) 10% of the cost of the conversion.
If you purchased a qualified hybrid vehicle weighing 8,500 pounds or less or an 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.
No 2009 credit is allowed for Toyota, Lexus, and Honda advanced lean burn technology vehicles and hybrid vehicles weighing 8,500 pounds or less. For certain other vehicles the credit is reduced. See the Form 8910 instructions.
If the vehicle no longer qualifies for the credit, you may have to recapture part or all of the credit.taxmap/pub17/p17-195.htm#en_us_publink1000174921
To 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 53. Check box c and enter "8910" on the line next to box c.taxmap/pub17/p17-195.htm#en_us_publink1000174922
For more information on the credit, see the instructions for Form 8910.taxmap/pub17/p17-195.htm#en_us_publink1000174923
You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2009.taxmap/pub17/p17-195.htm#en_us_publink1000174924
Qualified 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.
The following are alternative fuels.
- Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen.
- Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene.
For personal use property, the credit is generally the smaller of 50% of the property's cost or $2,000. For business use property, the credit is generally the smaller of 50% of the property's cost or $50,000. The amounts are different for hydrogen refueling property.taxmap/pub17/p17-195.htm#en_us_publink1000174927
To 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 53. Check box c and enter "8911" on the line next to box c.taxmap/pub17/p17-195.htm#en_us_publink1000174928
For more information on the credit, see the instructions for Form 8911.taxmap/pub17/p17-195.htm#en_us_publink1000174929
You 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,
- Gulf tax credit bonds,
- Qualified energy conservation bonds,
- Midwestern tax credit bonds,
- Qualified forestry conservation bonds,
- Qualified school construction bonds,
- Qualified zone academy bonds, and
- Build America bonds.
The issuers do not pay interest on these types of bonds (except build America bonds). Instead of receiving interest, the bondholders qualify to claim a tax credit.taxmap/pub17/p17-195.htm#en_us_publink1000174930
The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return.taxmap/pub17/p17-195.htm#en_us_publink1000174931
Complete Form 8912 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 53. Check box c, and enter "8912" on the line next to box c.taxmap/pub17/p17-195.htm#en_us_publink1000174932
For more information, see the instructions for Form 8912.taxmap/pub17/p17-195.htm#en_us_publink1000174933
You 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 47.taxmap/pub17/p17-195.htm#en_us_publink1000174938
You 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/p17-195.htm#en_us_publink1000174939
The 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/p17-195.htm#en_us_publink1000174940
You 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/p17-195.htm#en_us_publink1000174941
Figure 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|| |
If 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/p17-195.htm#en_us_publink1000174944
Your credit (after applying the limit based on the 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/p17-195.htm#en_us_publink1000174945
Figure your 2009 credit and any carryforward to 2010 on Form 8396, and attach it to your Form 1040. Be sure to include any credit carryforward from 2006, 2007, and 2008.
Include the credit in your total for Form 1040, line 52, and check box a. taxmap/pub17/p17-195.htm#en_us_publink1000174946
If 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 2010. 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/p17-195.htm#en_us_publink1000174949
The 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 2008 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 2009, or
- An unallowed qualified electric vehicle credit.
Figure your 2009 nonrefundable credit (if any), and any carryforward to 2010 on Form 8801, and attach it to your Form 1040. Include the credit in your total for Form 1040, line 53, 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/p17-195.htm#en_us_publink1000174953
For more information about the credit, see the instructions for Form 8801.taxmap/pub17/p17-195.htm#en_us_publink1000210768
You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle in 2009.taxmap/pub17/p17-195.htm#en_us_publink1000210769
The amount of the credit varies depending on the battery capacity and vehicle weight limitations and ranges from $2,500 to $15,000.taxmap/pub17/p17-195.htm#en_us_publink1000210770
A qualified plug-in electric drive motor vehicle is a new vehicle that:
- Draws propulsion using a traction battery with at least 4 kilowatts of capacity, and
- Uses an offboard source of energy to recharge the battery.
To take the credit, you must complete Form 8936 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 53. Check box c and enter "8936" on the line next to box c.
You may be able to take this credit if you acquired a qualified plug-in electric vehicle after February 17, 2009. A qualified vehicle can have 2, 3, or 4 wheels. A vehicle with 4 wheels must be a low speed vehicle.taxmap/pub17/p17-195.htm#en_us_publink1000210773
The credit is 10% of the cost of the vehicle, limited to $2,500 per vehicle.taxmap/pub17/p17-195.htm#en_us_publink1000210774
A qualified plug-in electric vehicle is a motor vehicle the original use of which starts with you and that:
- Is acquired for your use or lease and not for resale,
- Is made by a manufacturer,
- Is manufactured primarily for use on public streets, roads, and highways,
- Has a gross vehicle weight rating of less than 3,000 pounds if it has 4 wheels and less than 14,000 pounds if it has 2 or 3 wheels,
- Is a low speed vehicle if it has 4 wheels, and
- Is propelled to a significant extent by an electric motor that draws electricity from a battery that:
- Has a capacity of at least 4 kilowatt hours (2.5 kilowatt hours in the case of a vehicle with 2 or 3 wheels), and
- Is capable of being recharged from an external source of electricity.
To take the credit, you must complete Form 8834 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 53. Check box c and enter "8834" on the line next to box c.
You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2009.
- Nonbusiness energy property credit.
- Residential energy efficient property credit.
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 the association or corporation for purposes of these credits.taxmap/pub17/p17-195.htm#en_us_publink1000209300
You may be able to take a credit of 30% of the costs paid or incurred in 2009 for any qualified energy efficiency improvements and any residential energy property.
The credit is limited to a total of $1,500 for 2009 and 2010.
Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency.
- Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home.
- Exterior windows (including skylights).
- Exterior doors.
- Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home.
Residential energy property is any of the following.
- Certain heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heaters; and stoves that use biomass fuel.
- Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers.
- Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces.
You may be able to take a credit of 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. The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.taxmap/pub17/p17-195.htm#en_us_publink1000174957
You must reduce the basis of your home by the amount of any credit allowed.taxmap/pub17/p17-195.htm#en_us_publink1000174958
Complete Form 5695 and attach it to your Form 1040. Enter the credit on Form 1040, line 52, and check box c.
For more information on this credit, see the instructions for Form 5695.taxmap/pub17/p17-195.htm#en_us_publink1000174960
You 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 $27,750 ($41,625 if head of household; $55,500 if married filing jointly).
- The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1992, (b) is claimed as a dependent on someone else's 2009 tax return, or (c) was a student (defined next).
You were a student if during any part of 5 calendar months of 2009 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/p17-195.htm#en_us_publink1000174963
Figure the credit on Form 8880. Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return.