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taxmap/pub17/p17-196.htm#en_us_publink1000174964

Refundable Credits(p260)


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previous topic occurrence Refundable Credit next topic occurrence

The credits discussed in this part of the chapter are treated as payments of tax. If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you.
taxmap/pub17/p17-196.htm#en_us_publink1000174965

Credit for Tax on Undistributed Capital Gain(p260)


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Undistributed Capital Gain Tax Credit

You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. The mutual fund or REIT will send you Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, showing your share of the undistributed capital gains and the tax paid, if any. Take the credit for the tax paid by entering the amount on Form 1040, line 70, and checking box a. Attach Copy B of Form 2439 to your return. See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains.
taxmap/pub17/p17-196.htm#en_us_publink1000174967

First-Time Homebuyer Credit(p260)


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previous topic occurrence First-time Homebuyer Credit next topic occurrence

In general, you can claim this credit if: No credit is allowed for a home bought after April 30, 2010 (after June 30, 2010, if you entered into a written binding contract before May 1, 2010).
taxmap/pub17/p17-196.htm#en_us_publink1000235721

Special rule for long-time residents of same main home.(p261)


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Special Rule for Long-time Residents of Same Main Home

Even if you are not a first-time homebuyer, you may be able to claim the credit if:
  1. You buy a main home in the United States after November 6, 2009, and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010), and
  2. You (and your spouse, if married) owned and used the same home as your main home for any period of 5 consecutive years during the 8-year period ending on the date of purchase of the home described in (1).
taxmap/pub17/p17-196.htm#en_us_publink1000235722

Home bought in 2010.(p261)


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Home Bought in 2010

You can choose to claim the credit on your 2009 return for a main home you bought in 2010 before May 1 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010).
taxmap/pub17/p17-196.htm#en_us_publink1000235723

Main home.(p261)


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previous topic occurrence Primary Residence next topic occurrence

Your main home is the one you live in most of the time. It can be a house, houseboat, mobile home, cooperative apartment, or condominium.
taxmap/pub17/p17-196.htm#en_us_publink1000235724

Home constructed by you.(p261)


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Home Constructed by You

If you constructed your main home, you are treated as having bought it on the date you first occupied it.
taxmap/pub17/p17-196.htm#en_us_publink1000235725

Who cannot claim the credit.(p261)


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You cannot claim the credit if any of the following apply.
  1. You are a nonresident alien.
  2. Your home is located outside the United States.
  3. You sell the home, or it stops being your main home, before the end of 2009.
  4. You acquired your home by gift or inheritance.
  5. You bought your home before November 7, 2009, and your modified adjusted gross income (MAGI) is $95,000 or more ($170,000 or more if married filing jointly), or you bought your home after November 6, 2009, and your MAGI is $145,000 or more ($245,000 or more if married filing jointly). See Modified adjusted gross income (MAGI) later.
  6. You bought your home after November 6, 2009, and:
    1. Your purchase price is more than $800,000,
    2. You can be claimed as a dependent on someone else's return, or
    3. You (and your spouse, if married) were younger than 18 when you bought the home.
  7. You acquired your home from a related person. A related person includes:
    1. Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.).
    2. Your spouse's ancestors or lineal descendants if you are married and bought your home after November 6, 2009.
    3. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
    4. A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.
For more information about related persons, see Nondeductible Loss in chapter 2 of Publication 544, Sales and Other Dispositions of Assets.
taxmap/pub17/p17-196.htm#en_us_publink1000235727

Amount of the credit.(p261)


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Generally, the credit is the smaller of: However, if the Special rule for long-time residents of same main home described earlier applies, the credit can be no more than $6,500 ($3,250 if married filing separately).
If you bought the home before November 7, 2009, you are allowed the full amount of the credit if your modified adjusted gross income (MAGI) is $75,000 or less ($150,000 or less if married filing jointly). The credit is reduced if MAGI is more than $75,000 ($150,000 if married filing jointly). The credit is completely eliminated if MAGI is $95,000 ($170,000 if married filing jointly) or more.
If you bought the home after November 6, 2009, you are allowed the full amount of the credit if your MAGI is $125,000 or less ($225,000 or less if married filing jointly). The credit is reduced if MAGI is more than $125,000 ($225,000 if married filing jointly). The credit is completely eliminated if MAGI is $145,000 ($245,000 if married filing jointly) or more.
taxmap/pub17/p17-196.htm#en_us_publink1000174972

Modified adjusted gross income (MAGI).(p261)
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Your MAGI is the amount from Form 1040, line 38, increased by the total of any:
DepositCredit claimed on 2008 return.
The maximum credit was originally $7,500 ($3,750 if married filing separately). So if you made the election to claim the credit on your 2008 return for a home you bought in 2009 and you did not use the February 2009 revision of Form 5405, you now may be able to claim a larger credit, not to exceed a total credit of $8,000, on an amended 2008 return. See Amended Returns and Claims for Refund in chapter 1.
taxmap/pub17/p17-196.htm#en_us_publink1000174973

Repayment of credit.(p261)


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If you bought the home in 2009 or 2010, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. This includes situations where you sell the home, you convert it to business or rental property, the home is destroyed, condemned, or disposed of under threat of condemnation, or the lender forecloses on the mortgage. You repay the credit by including it as additional tax on the return for the year the home stops being your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.
If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit.
taxmap/pub17/p17-196.htm#en_us_publink1000174976

Exceptions.(p261)
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The following are exceptions to the repayment rule.
taxmap/pub17/p17-196.htm#en_us_publink1000209391

Home bought in 2008.(p261)
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You generally must repay any credit you claimed for a home you bought in 2008 and sold in 2009.
In some cases, there is an exception for members of the uniformed services or Foreign Service and for intelligence community employees.
taxmap/pub17/p17-196.htm#en_us_publink1000174977

How to take the credit.(p261)


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To take the credit, complete Form 5405 and attach it to your Form 1040. Enter your credit on Form 1040, line 67.
taxmap/pub17/p17-196.htm#en_us_publink1000209392

How to repay the credit.(p261)


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If you are required to repay the credit, complete Parts III and IV of Form 5405. Attach the form to your Form 1040. Include the repayment on Form 1040, line 60. On the dotted line to the left of line 60, enter the amount of repayment and "FTHCR."
taxmap/pub17/p17-196.htm#en_us_publink1000234811

More information.(p261)


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For more information, including special rules for members of the Armed Forces, see Form 5405 and its instructions.
taxmap/pub17/p17-196.htm#en_us_publink1000174978

Health Coverage Tax Credit(p262)


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You may be able to take this credit for any month in which all the following statements were true on the first day of the month. But, you cannot take the credit if you can be claimed as a dependent on someone else's 2009 tax return. If you meet all of these conditions, you may be able to take a credit of up to 65% (80% effective May 1, 2009) of the amount you paid for qualified health insurance coverage for you and any qualifying family members. You cannot take the credit for insurance premiums on coverage that was partially paid for with a National Emergency Grant. The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage.
You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return.
For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, and employer-sponsored health insurance plans, see Publication 502 and the instructions for Form 8885.
taxmap/pub17/p17-196.htm#en_us_publink1000234741

TAA recipient.(p262)


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TAA Recipient

You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you:
taxmap/pub17/p17-196.htm#en_us_publink1000234742

Example.(p262)

You received a trade adjustment allowance for January 2009. You were an eligible TAA recipient on the first day of January and February.
taxmap/pub17/p17-196.htm#en_us_publink1000234743

Alternative TAA recipient.(p262)


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Alternative TAA Recipient

You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor.
taxmap/pub17/p17-196.htm#en_us_publink1000234744

Example.(p262)

You received benefits under an alternative trade adjustment assistance program for older workers for October 2009. The program was established by the Department of Labor. You were an eligible alternative TAA recipient on the first day of October and November.
taxmap/pub17/p17-196.htm#en_us_publink1000234745

RTAA recipient.(p262)


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RTAA

You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor.
taxmap/pub17/p17-196.htm#en_us_publink1000234746

PBGC pension recipient.(p262)


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PBGC Pension Recipient

You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply.
  1. You were age 55 or older on the first day of the month.
  2. You received a benefit for that month that was paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA).
If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment.
taxmap/pub17/p17-196.htm#en_us_publink1000234747

How to take the credit.(p262)


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To take the credit, complete Form 8885 and attach it to your Form 1040. Include your credit in the total for Form 1040, line 70, and check box d.
You must attach invoices and proof of payment for any amounts you include on Form 8885, line 2. For details, see Publication 502 or Form 8885.
taxmap/pub17/p17-196.htm#en_us_publink1000209395

Making Work Pay Credit(p262)


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You may be able to take this credit if you have earned income from work. Even if your federal income tax withholding was reduced during 2009 because of the credit, you must complete Schedule M (Form 1040A or 1040) and claim the credit on your return to benefit from it. You cannot take the credit if your modified adjusted gross income (AGI) is $95,000 ($190,000 if married fiing jointly) or more, you are a nonresident alien, or you can be claimed as a dependent on someone else's return.
The credit is 6.2% of your earned income but cannot be more than $400 ($800 if married filing jointly).
The credit is reduced if:
taxmap/pub17/p17-196.htm#en_us_publink1000174987

How to take the credit.(p262)


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To take the credit, complete Schedule M (Form 1040A or 1040) and attach it to your Form 1040 or 1040A. Include your credit on Form 1040, line 63, or Form 1040A, line 40. If you are filing Form 1040-EZ, you can take the credit on line 8 of that form and do not have to file Schedule M.
taxmap/pub17/p17-196.htm#en_us_publink1000209396

Government Retiree Credit(p262)


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Government Retiree Credit

You can take this credit if you received a pension or annuity payment in 2009 for service performed for the U.S. Government or any U.S. state or local government (or any agency of one or more of these) and the service was not covered by social security.
The credit is $250 ($500 if married filing jointly and both you and your spouse received a qualifying pension or annuity). However, you cannot take the credit if you received a $250 economic recovery payment during 2009. You may have received an economic recovery payment if you received social security benefits, SSI benefits, railroad retirement benefits, or veterans disability compensation or pension benefits. No government retiree credit is allowed if (a) you file a joint return, (b) both you and your spouse received a qualifying pension or annuity, and (c) both of you received an economic recovery payment; if only one of you received an economic recovery payment, the credit is $250.
taxmap/pub17/p17-196.htm#en_us_publink1000209397

How to take the credit.(p262)


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To take the credit, complete Schedule M (Form 1040A or 1040) and attach it to your Form 1040 or 1040A. Include your credit on Form 1040, line 63, or Form 1040A, line 40.
taxmap/pub17/p17-196.htm#en_us_publink1000174988

Refundable Credit for Prior Year Minimum Tax(p262)


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Refundable Credit for Prior Year Minimum Tax

If you paid the alternative minimum tax for 2008 or you had a minimum tax credit carryforward to 2009, you may be able to take a credit for prior year minimum tax. For information about the nonrefundable credit for prior year minimum tax you may be able to take, see Nonrefundable Credit for Prior Year Minimum Tax, earlier. However, for 2009, you may qualify for a refundable credit for prior year minimum tax if you have any unused minimum tax credit carryforward from 2006 or earlier years, even if the total amount of your current year credit is more than your total tax liability. To figure the amount of any 2009 refundable credit, complete Part IV of Form 8801. Include any refundable credit on Form 1040, line 70, and check box c.
taxmap/pub17/p17-196.htm#en_us_publink1000174990

Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld(p263)


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Most employers must withhold social security tax from your wages. If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax.
If you worked for two or more employers in 2009, you may have had too much social security or tier 1 RRTA tax withheld from your pay. You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax. The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2009.
Type of tax Maximum
wages
subject to tax
Maximum tax
that should
have been
withheld
Social security or
RRTA tier 1
$106,800$6,621.60
RRTA tier 2$79,200$3,088.80
EIC
All wages are subject to Medicare tax withholding. 
Deposit
Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Be sure to attach a copy of all of your W-2 forms. See the worksheet in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount.
taxmap/pub17/p17-196.htm#en_us_publink1000174994

Employer's error.(p263)


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Employer's Error

If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. The employer should adjust the tax for you. If the employer does not adjust the overcollection, you can file a claim for refund using Form 843.
taxmap/pub17/p17-196.htm#en_us_publink1000174995

Joint return.(p263)


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previous topic occurrence Joint Return next topic occurrence

If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Figure the withholding separately for you and your spouse to determine if either of you has excess withholding.
taxmap/pub17/p17-196.htm#en_us_publink1000174996

How to figure the credit if you did not work for a railroad.(p263)


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How to Figure the Credit if You Did Not Work for a Railroad

If you did not work for a railroad during 2009, figure the credit as follows:
1.Add all social security tax withheld (but not more than $6,621.60 for each employer). Enter the total
here
            
2.Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60             
3.Add lines 1 and 2. If $6,621.60 or less, stop here. You cannot take
the credit
            
4.Social security tax limit 6,621.60
5.Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 44)             
taxmap/pub17/p17-196.htm#en_us_publink1000174998

Example.(p263)

You are married and file a joint return with your spouse who had no gross income in 2009. During 2009, you worked for the Brown Technology Company and earned $60,000 in wages. Social security tax of $3,720 was withheld. You also worked for another employer in 2009 and earned $55,000 in wages. $3,410 of social security tax was withheld from these wages. Because you worked for more than one employer and your total wages were more than $106,800, you can take a credit of $508.40 for the excess social security tax withheld.
1.Add all social security tax withheld (but not more than $6,621.60 for each employer). Enter the total
here
$7,130.00
2.Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60   -0- 
3.Add lines 1 and 2. If $6,621.60 or less, stop here. You cannot take the credit  7,130.00
4.Social security tax limit  6,621.60
5.Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 44)  $508.40
taxmap/pub17/p17-196.htm#en_us_publink1000175000

How to figure the credit if you worked for a railroad.(p263)


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How to Figure the Credit if You Worked for a Railroad

If you were a railroad employee at any time during 2009, figure the credit as follows:
1.Add all social security and tier 1 RRTA tax withheld (but not more than $6,621.60 for each employer). Enter the total here             
2.Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60             
3.Add lines 1 and 2. If $6,621.60 or less, stop here. You cannot take
the credit
            
4.Social security and tier 1 RRTA
tax limit
6,621.60
5.Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 44)             
taxmap/pub17/p17-196.htm#en_us_publink1000175002

How to take the credit.(p263)


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Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 44.