37. Other Credits
What's New
Adoption credit. The maximum adoption credit increases to $11,390. See for more information.
Refundable credit for prior year minimum tax. If you have any unused minimum tax credit carryforward from 2004 or earlier years, you may qualify for a refund of that credit amount. See for more information.
Excess withholding of social security tax and railroad retirement tax. 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 $97,500 in 2007. The withholding rate of tier 2 RRTA is 3.9% of wages in 2007. The maximum wages subject to this tax increased to $72,600 in 2007. If you had too much social security or RRTA tax withheld during 2007, you may be entitled to a credit of the excess withholding. For more information about the credit, see under Refundable Credits, later.
Credit for federal telephone excise tax paid. The credit for federal telephone excise tax was only available on your 2006 return. If you did not request this credit on your 2006 return, file Form 1040X using a simplified procedure explained in its instructions to amend your 2006 return.
Introduction
This chapter discusses the following nonrefundable credits.
- Adoption credit.
- Alternative motor vehicle credit.
- Alternative fuel vehicle refueling property credit.
- Credit for clean renewable energy bonds or Gulf tax credit bonds.
- Foreign tax credit.
- Mortgage interest credit.
- Nonrefundable credit for prior year minimum tax.
- Residential energy credits.
- Retirement savings contributions credit.
This chapter also discusses the following refundable credits.
- Credit for tax on undistributed capital gain.
- Health coverage tax 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).
Nonrefundable credits.
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.Refundable credits.
The second part of this chapter, Refundable Credits, covers four 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.Useful 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
- 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
- 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 for Clean Renewable Energy and Gulf Tax Credit Bonds
Nonrefundable Credits
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.
Adoption Credit
You may be able to take a tax credit of up to $11,390 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 $170,820, your credit is reduced. If your modified AGI is $210,820 or more, you cannot take the credit.
Qualified adoption expenses.
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.
Nonqualified expenses.
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.
Eligible child.
The term “eligible child” means any individual:- Under 18 years old, or
- Physically or mentally incapable of caring for himself or herself.
Child with special needs.
An eligible child is a child with special needs if all three of the following apply.- He or she 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.
When to take the credit.
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.Foreign child.
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.How to take the credit.
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 54, and check box c on that line.Alternative Motor Vehicle Credit
You may be able to take a credit if you place an alternative motor vehicle in service in 2007.
Alternative motor vehicle.
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.
Amount of credit.
Generally, for a qualified alternative fuel motor vehicle, an advanced lean burn technology vehicle, or for a passenger car or truck (light or heavy duty) that is 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.Additional requirements.
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 after 2005;
- 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.
Phaseout of credit.
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. See the Form 8910 instructions. The phaseout period has begun for certain qualified hybrid vehicles purchased for use or lease in 2007. See IRS news article, Summary of the Credit for Qualified Hybrid Vehicles, on the Internet at www.irs.gov/newsroom/article/0,,id=157557,00.html.Recapture of credit.
If the vehicle no longer qualifies for the credit, you must recapture part or all of the credit.How to take the credit.
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 55. Check box c and enter “8910” on the line next to box c.More information.
For more information on the credit, see the instructions for Form 8910.Alternative Fuel Vehicle Refueling Property Credit
You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2007.
Qualified alternative fuel vehicle refueling property.
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.Amount of the credit.
For 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.How to take the credit.
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 55. Check box c and enter “8911” on the line next to box c.More information.
For more information on the credit, see the instructions for Form 8911.Credit for Clean Renewable Energy Bonds or Gulf Tax Credit Bonds
You may be able to take a credit if you are a holder of a clean renewable energy bond (CREB) or Gulf tax credit bond (GTCB). CREBs are tax credit bonds issued after 2005 by certain tax-exempt electricity providers to finance renewable energy projects. GTCBs are tax credit bonds issued after 2005 by the state of Alabama, Louisiana, or Mississippi that are designated by the governor of those states as GTCBs and that meet certain other requirements. The issuers do not pay interest on both types of bonds. Instead of receiving interest, the bondholders qualify to claim a tax credit.
Who can claim the credits.
If you hold a CREB and/or a GTCB on 1 or more credit allowance dates, you can claim either the CREB credit or the GTCB credit by filing Form 8912. The credit allowance dates are:- March 15,
- June 15,
- September 15, and
- December 15.
Amount of credit.
The amount of the credit with respect to each credit allowance date is generally equal to 25% of the annual credit for the bond. However, the 25% will be prorated for the quarters in which the bond is issued, redeemed or matures.Interest income.
The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return.How to take the credit.
To take either credit, you must complete Form 8912 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 55. Check box c, and enter “8912” on the line next to box c.More information.
For more information on these credits, see the instructions for Form 8912.Foreign Tax Credit
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 ).
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.
- Extraterritorial income exclusion.
Limit on the credit.
Unless you can elect not to file Form 1116 (see , 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.How to take the credit.
Complete Form 1116 and attach it to your Form 1040. Enter the credit on Form 1040, line 51.Exception.
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.
Mortgage Interest Credit
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.
Who qualifies.
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.Amount of credit.
Figure your credit on Form 8396. If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount (loan) 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 |
Limit based on credit rate.
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.Carryforward.
Your 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).How to take the credit.
Figure your 2007 credit and any carryforward to 2008 on Form 8396, and attach it to your Form 1040. Be sure to include any credit carryforward from 2004, 2005, and 2006. Include the credit in your total for Form 1040, line 54, and check box a.Reduced home mortgage interest deduction.
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 2008. For more information about the home mortgage interest deduction, see .Recapture of federal mortgage subsidy.
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.Nonrefundable Credit for Prior Year Minimum Tax
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 2006 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 2007, or
- An unallowed qualified electric vehicle credit.
The amount of the credit cannot reduce your current year's tax below your current year's tentative alternative minimum tax.
Refundable credit.
If you have any unused minimum tax credit carryforward from 2004 or earlier years, you may qualify for a refund of that credit amount. For more information, see later.How to take the credit.
Figure your 2007 nonrefundable credit (if any), and any carryforward to 2008 on Form 8801, and attach it to your Form 1040. Include the credit in your total for Form 1040, line 55, and check box b. You can carry forward any unused credit for prior year minimum tax to later years until it is completely used.More information.
For more information about the credit, see the instructions for Form 8801.Residential Energy Credits
You may be eligible for 2 credits, the nonbusiness energy property credit and the residential energy efficient property credit, if you made energy saving improvements to your home.
Nonbusiness energy property credit.
You may be able to take this credit for any of the following improvements to your main home located in the United States in 2007 if they are new and meet certain requirements for energy efficiency.- Any insulation material or system primarily designed to reduce heat gain or loss in your home.
- Exterior windows (including skylights).
- Exterior doors.
- A metal roof with pigmented coatings primarily designed to reduce heat gain in your home.
- Certain electric heat pump water heaters, electric heat pumps, geothermal heat pumps, central air conditioners, and natural gas, propane, or oil water heaters.
- A qualified natural gas, propane, or oil furnace or hot water boiler.
- An advanced main air circulating fan used in a natural gas, propane, or oil furnace.
Residential energy efficient property credit.
You may be able to take this credit if you paid for any of the following during 2007.- Qualified solar electric property for use in your home located in the United States.
- Qualified solar water heating property for use in your home located in the United States.
- Qualified fuel cell property installed on or in connection with your main home located in the United States.
For more information about the residential energy efficient property credit, see the instructions for Form 5695.
Condominiums and cooperative apartments.
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 these credits.Basis reduction.
You must reduce the basis of your home by the amount of any credits allowed.How to take the credits.
To take either of the credits, you must complete Form 5695 and attach it to your Form 1040. Enter the credit on Form 1040, line 50.More information.
For more information on these credits, see the instructions for Form 5695.Retirement Savings Contributions Credit
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 $26,000 ($39,000 if head of household; $52,000 if married filing jointly).
- The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1990, (b) is claimed as a dependent on someone else's 2007 tax return, or (c) was a student (defined next).
Student.
You were a student if during any part of 5 calendar months of 2007 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.
School.
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.How to take the credit.
Figure the credit on Form 8880. Enter the credit on your Form 1040, line 53, or your Form 1040A, line 33, and attach Form 8880 to your return.Refundable Credits
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.
Credit for Tax on Undistributed Capital Gain
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 in chapter 8 for more information on undistributed capital gains.
Health Coverage Tax Credit
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.
- You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later).
- You were covered by a qualified health insurance plan for which you paid the premiums directly to your health plan.
- You were not entitled to Medicare Part A or enrolled in Medicare Part B.
- You were not enrolled in Medicaid or the State Children's Health Insurance Program (SCHIP).
- You were not enrolled in the Federal Employees Health Benefits (FEHB) program or eligible to receive benefits under the U.S. military health system (TRICARE).
- You were not covered by, or eligible for coverage under, any employer-sponsored health insurance plan (including any employer-sponsored health insurance plan of your spouse).
- You were not imprisoned under federal, state, or local authority.
But, you cannot take the credit if you can be claimed as a dependent on someone else's 2007 tax return. If you meet all of these conditions, you may be able to take a credit of up to 65% of the amount you paid for qualified health insurance coverage for you and any qualifying family members. The amount you paid for qualified health insurance coverage must be reduced by any (a) Archer MSA and health savings account distributions used to pay for the coverage, and (b) National Emergency Grants you received for health insurance in 2007.
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.
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:
- Received a trade readjustment allowance, or
- Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied).
Example.
You received a trade adjustment allowance for January 2007. You were an eligible TAA recipient on the first day of January and February.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.
Example.
You received benefits under an alternative trade adjustment assistance program for older workers for October 2007. The program was established by the Department of Labor. You were an eligible alternative TAA recipient on the first day of October and November.PBGC Pension Recipient
You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply.
- You were age 55 or older on the first day of the month.
- 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.
How To Take the Credit
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 c.
You must attach invoices and proof of payment for any amounts you include on Form 8885, line 2, for which an advance payment of the credit was not made on your behalf. For details, see Publication 502 or Form 8885.
Refundable Credit for Prior Year Minimum Tax
If you paid the alternative minimum tax for 2006 or you had a minimum tax credit carryforward to 2007, 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 earlier. However, for 2007, you may qualify for a refundable credit for prior year minimum tax if you have any unused minimum tax credit carryforward from 2004 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 2007 refundable credit, complete Part IV of Form 8801. Include any refundable credit on Form 1040, line 71. You can carry forward any unused credit for prior year minimum tax to later years.
Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld
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 2007, 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 2007.
| Type of tax | Maximum wages subject to tax | Maximum tax that should have been withheld |
| Social security or RRTA tier 1 | $97,500 | $6,045.00 |
| RRTA tier 2 | $72,600 | $2,831.40 |
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.
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.Joint return.
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.How to figure the credit if you did not work for a railroad.
If you did not work for a railroad during 2007, figure the credit as follows:| 1. | Add all social security tax withheld (but not more than $6,045.00 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 63 | |
| 3. | Add lines 1 and 2. If $6,045.00 or less, stop here. You cannot take the credit | |
| 4. | Social security tax limit | 6,045.00 |
| 5. | Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 67 (or Form 1040A, line 42) |
Example —
You are married and file a joint return with your spouse who had no gross income in 2007. During 2007, you worked for the Brown Shoe Company and earned $60,000 in wages. Social security tax of $3,720 was withheld. You also worked for another employer in 2007 and earned $51,000 in wages. $3,162 of social security tax was withheld from these wages. Because you worked for more than one employer and your total wages were more than $97,500, you can take a credit of $837.00 for the excess social security tax withheld.
| 1. | Add all social security tax withheld (but not more than $6,045.00 for each employer). Enter the total here | $6,882.00 |
| 2. | Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 63 | -0- |
| 3. | Add lines 1 and 2. If $6,045.00 or less, stop here. You cannot take the credit | 6,882.00 |
| 4. | Social security tax limit | 6,045.00 |
| 5. | Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 67 (or Form 1040A, line 42) | $837.00 |
How to figure the credit if you worked for a railroad.
If you were a railroad employee at any time during 2007, figure the credit as follows:| 1. | Add all social security and tier 1 RRTA tax withheld (but not more than $6,045.00 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 63 | |
| 3. | Add lines 1 and 2. If $6,045.00 or less, stop here. You cannot take the credit | |
| 4. | Social security and tier 1 RRTA tax limit | 6,045.00 |
| 5. | Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 67 (or Form 1040A, line 42) |
