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Publication 17
taxmap/pub17/p17-187.htm#en_us_publink1000174964

Refundable Credits(p257)

rule
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/p17-187.htm#en_us_publink1000246887

Adoption Credit(p257)

rule
You may be able to take a tax credit of up to $13,360 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 $185,210, your credit is reduced. If your modified AGI is $225,210 or more, you cannot take the credit.
taxmap/pub17/p17-187.htm#en_us_publink1000246888

Qualified adoption expenses.(p257)

rule
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: .
taxmap/pub17/p17-187.htm#en_us_publink1000246889
Nonqualified expenses.(p257)
Qualified adoption expenses do not include expenses:
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Eligible child.(p257)

rule
The term "eligible child" means any individual:
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Child with special needs.(p257)
An eligible child is a child with special needs if all three of the following apply.
  1. The child was a citizen or resident of the United States (including U.S. possessions) at the time the adoption process began.
  2. A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home.
  3. 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:
    1. The child's ethnic background,
    2. The child's age,
    3. Whether the child is a member of a minority or sibling group, and
    4. Whether the child has a medical condition or a physical, mental, or emotional handicap.
taxmap/pub17/p17-187.htm#en_us_publink1000246892

When to take the credit.(p257)

rule
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/p17-187.htm#en_us_publink1000246893
Foreign child.(p257)
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/p17-187.htm#en_us_publink1000252285

Substantiation requirements.(p257)

rule
You must include a copy of one or more adoption-related documents with your return to claim the credit.
taxmap/pub17/p17-187.htm#en_us_publink1000252286
Adoption finalized in the United States.(p257)
For a domestic or foreign adoption finalized in the United States, you must provide a copy of an adoption order or decree.
taxmap/pub17/p17-187.htm#en_us_publink1000252287
Domestic adoptions that are not final.(p257)
For domestic adoptions that are not final, you must include an adoption taxpayer identification number, obtained for the child, on your tax return or provide a copy of one of the following documents.
  1. A home study completed by an authorized placement agency.
  2. A placement agreement with an authorized placement agency.
  3. A document signed by a hospital official authorizing the release of a newborn child from the hospital to you for legal adoption.
  4. A court document ordering or approving the placement of a child with you for legal adoption.
  5. An original affidavit or notarized statement, signed under penalties of perjury, from an adoption attorney, government official, or other person, stating that he or she (a) placed or is placing a child with you for legal adoption or (b) is facilitating the adoption process for you in an official capacity.
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Adoptions of special needs children.(p257)
If you are adopting a special needs child, you also must attach a copy of the state determination of special needs to your tax return.
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How to take the credit.(p257)

rule
To take the credit, you must complete Form 8839 and attach it and your adoption-related documents to your Form 1040. Include the credit in your total for Form 1040, line 71, and check box b on that line.
taxmap/pub17/p17-187.htm#en_us_publink1000260896

More information.(p258)

rule
For more information, including what documents to include for adoptions finalized outside of the United States, see the instructions for Form 8839.
taxmap/pub17/p17-187.htm#en_us_publink1000174965

Credit for Tax on Undistributed Capital Gain(p258)

rule
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 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 71, and checking box a. Attach Copy B of Form 2439 to your return.
taxmap/pub17/p17-187.htm#en_us_publink1000261333

More information.(p258)

rule
See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains.
taxmap/pub17/p17-187.htm#en_us_publink1000174967

First-Time Homebuyer Credit(p258)

rule
For most people, this credit is not available for homes purchased in 2011. Members of the uniformed services or Foreign Service and employees of the intelligence community may still be able to claim the credit.
In general, you can claim the credit only if you meet all three of the following requirements.
  1. You (or your spouse if married) are, or were, a member of the uniformed services or Foreign Service or an employee of the intelligence community and were on qualified official extended duty for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.
  2. You bought a main home in the United States:
    1. After December 31, 2010, and before May 1, 2011, or
    2. After April 30, 2011, and before July 1, 2011, and you entered into a binding contract before May 1, 2011, to buy the home before July 1, 2011.
  3. You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
taxmap/pub17/p17-187.htm#en_us_publink1000261314

Special rule for long-time residents of same main home.(p258)

rule
Even if your are not a first-time homebuyer, you may be able to claim the credit if you meet all three of the following requirements.
  1. You (or your spouse if married) are, or were, a member of the uniformed services or Foreign Service or an employee of the intelligence community and were on qualified official extended duty for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.
  2. You bought your main home in the United States:
    1. After December 31, 2010, and before May 1, 2011, or
    2. After April 30, 2011, and before July 1, 2011, and you entered into a binding contract before May 1, 2011, to buy the home before July 1, 2011.
  3. You (and your spouse if married) previously owned and used the same main home as your main home for any 5 consecutive year period during the 8-year period ending on the date of purchase of the main home described in (2).
taxmap/pub17/p17-187.htm#en_us_publink1000261315

Main home.(p258)

rule
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/p17-187.htm#en_us_publink1000261380

Home constructed by you.(p258)

rule
If you constructed your main home, you are treated as having bought it on the date you first occupied it.
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Who cannot claim the credit(p258)

rule
You cannot claim the credit if any of the following apply.
  1. The purchase price of the home is more than $800,000.
  2. Your modified adjusted gross income is $145,000 or more ($245,000 or more if married filing jointly).
  3. You can be claimed as a dependent on another person's tax return.
  4. You (and your spouse if married) were under age 18 when you bought the home.
  5. You are a nonresident alien.
  6. Your home is located outside the United States.
  7. Neither you nor your spouse (if married) was on qualified official extended duty outside the United States as a member of the uniformed services or Foreign Service or an employee of the intelligence community for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.
  8. You acquired the home by gift or inheritance.
  9. 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. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation, and
    3. 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. When determining whether you acquired your main home from a related person, family members in that discussion include only the people mentioned in 9a, earlier.
  10. You acquired your home from a person related to your spouse. This includes your spouse's ancestors or lineal descendants (for example your parents-in-law or your stepchildren), and any relationships described in 9b or 9c that your spouse has.
taxmap/pub17/p17-187.htm#en_us_publink1000261320

Amount of the credit.(p258)

rule
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).
You are allowed the full amount of the credit if your modified adjusted gross income (MAGI) is $125,000 or less ($225,000 or less if married filing jointly). The phase-out of the credit begins when your MAGI exceeds $125,000 ($225,000 if married filing jointly). The credit is eliminated completely when your MAGI reaches $145,000 ($245,000 if married filing jointly).
taxmap/pub17/p17-187.htm#en_us_publink1000261381
Modified adjusted gross income (MAGI).(p258)
Your MAGI is the amount from Form 1040, line 38, increased by the total of any:
taxmap/pub17/p17-187.htm#en_us_publink1000174973

Repayment of credit.(p258)

rule
If you bought the home after 2008, 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/p17-187.htm#en_us_publink1000174976
Exceptions.(p258)
The following are exceptions to the repayment rule.
taxmap/pub17/p17-187.htm#en_us_publink1000250492
Home bought in 2008.(p259)
If you claimed the credit for a home you bought in 2008, you generally must have begun repaying it on your 2010 return. You must continue repaying it with your 2011 tax return. In addition, you generally must repay any credit you claimed for a home you bought in 2008 if you sold the home in 2011 or the home stopped being your main home in 2011. However, you do not have to repay the credit if one of the exceptions to the repayment rule applies.
taxmap/pub17/p17-187.htm#en_us_publink1000261382

How to take the credit.(p259)

rule
To take the credit, complete Form 5405 and attach it to your Form 1040. Enter your credit on Form 1040, line 67. Attach a copy of your settlement statement.
taxmap/pub17/p17-187.htm#en_us_publink1000209392

How to repay the credit.(p259)

rule
If you are required to repay the credit, complete Parts III and IV of Form 5405. You may have to complete Part V as well. Attach the form to your Form 1040. Include the repayment on Form 1040, line 59b
If you bought the home in 2008 and owned and used it as your main home for all of 2011, you can enter your 2011 repayment directly on Form 1040, line 59b, without attaching Form 5405.
taxmap/pub17/p17-187.htm#en_us_publink1000234811

More information.(p259)

rule
For more information, see Form 5405 and its instructions.
taxmap/pub17/p17-187.htm#en_us_publink1000174978

Health Coverage Tax Credit(p259)

rule
Note.If you received any advance (monthly) payments in March through December 2011, you are eligible to receive an additional 7.5% retroactive credit. For details, see Form 8885 and instructions.
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 2011 tax return. If you meet all of these conditions, you may be able to claim the tax credit for amounts you paid directly to a qualified health plan for you and any qualifying family members. The tax credit is 80% for payments made in January and February; the tax credit is 72.5% for payments made in March through December. You cannot take the credit for insurance premiums on coverage that was actually 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.
taxmap/pub17/p17-187.htm#en_us_publink1000234741

TAA recipient.(p259)

rule
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/p17-187.htm#en_us_publink1000234742

Example.(p259)

You received a trade adjustment allowance for January 2011. You were an eligible TAA recipient on the first day of January and February.
taxmap/pub17/p17-187.htm#en_us_publink1000234743

Alternative TAA recipient.(p259)

rule
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/p17-187.htm#en_us_publink1000234744

Example.(p259)

You received benefits under an alternative trade adjustment assistance program for older workers for October 2011. 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/p17-187.htm#en_us_publink1000234745

RTAA recipient.(p259)

rule
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/p17-187.htm#en_us_publink1000234746

PBGC pension recipient.(p259)

rule
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 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/p17-187.htm#en_us_publink1000234747

How to take the credit and the additional 7.5% retroactive credit.(p259)

rule
To take the credit(s), complete Form 8885 and attach it to your Form 1040. Include your credit in the total for Form 1040, line 71, and check box d.
You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. For details, see Publication 502 or Form 8885.
taxmap/pub17/p17-187.htm#en_us_publink1000253453

More information.(p259)

rule
For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the instructions for Form 8885.
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Refundable Credit for Prior Year Minimum Tax(p259)

rule
If you paid the alternative minimum tax for 2010 or you had a minimum tax credit carryforward to 2011, 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 2011, you may qualify for a refundable credit for prior year minimum tax if you had a minimum tax credit carryforward to 2009 (on your 2008 Form 8801, line 31) and you have not used all of that carryforward, even if the total amount of your current year credit is more than your total tax liability. To figure the amount of any 2011 refundable credit, complete Part IV of Form 8801. Include any refundable credit on Form 1040, line 71, and check box c.
taxmap/pub17/p17-187.htm#en_us_publink1000174990

Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld(p259)

rule
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 2011, 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 2011.
Type of taxMaximum
wages
subject to tax
Maximum tax
that should
have been
withheld
Social security or
RRTA tier 1
$106,800$4,485.60
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. Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount.
taxmap/pub17/p17-187.htm#en_us_publink1000174994

Employer's error.(p260)

rule
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/p17-187.htm#en_us_publink1000174995

Joint return.(p260)

rule
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/p17-187.htm#en_us_publink1000174996

How to figure the credit if you did not work for a railroad.(p260)

rule
If you did not work for a railroad during 2011, figure the credit as follows:
1.Add all social security tax withheld (but not more than $4,485.60 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 $4,485.60 or less, stop here. You cannot take
the credit
4.Social security tax limit4,485.60
5.Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)
taxmap/pub17/p17-187.htm#en_us_publink1000174998

Example.(p260)

You are married and file a joint return with your spouse who had no gross income in 2011. During 2011, you worked for the Brown Technology Company and earned $60,000 in wages. Social security tax of $2,520 was withheld. You also worked for another employer in 2011 and earned $55,000 in wages. $2,310 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 $344.40 for the excess social security tax withheld.
1.Add all social security tax withheld (but not more than $4,485.60 for each employer). Enter the total
here
$4,830.00
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 $4,485.60 or less, stop here. You cannot take the credit 4,830.00
4.Social security tax limit 4,485.60
5.Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $344.40
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How to figure the credit if you worked for a railroad.(p260)

rule
If you were a railroad employee at any time during 2011, figure the credit as follows:
1.Add all social security and tier 1 RRTA tax withheld (but not more than $4,485.60 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 $4,485.60 or less, stop here. You cannot take
the credit
4.Social security and tier 1 RRTA
tax limit
4,485.60
5.Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)
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How to take the credit.(p260)

rule
Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41.
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More information.(p260)

rule
For more information on the credit, see Publication 505.