Making work pay credit. 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. 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.

Adoption credit. The maximum adoption credit increases to $12,150. See Adoption Credit for more information.

First-time homebuyer credit. 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. 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. You may be able to take a credit for:

A plug-in electric drive motor vehicle placed in service in 2009. See Plug-in Electric Drive Motor Vehicle Credit for more information.
A plug-in electric vehicle bought after February 17, 2009. See Plug-in Electric Vehicle Credit for more information.
Conversion of a vehicle to a plug-in electric drive motor vehicle placed in service after February 17, 2009. See Alternative Motor Vehicle Credit 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 $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, later.

Introduction

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).

Nonrefundable credits.

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.

Refundable credits.

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.

Useful Items - You may want to see:

Publication

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 Credit

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 $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.

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.

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:
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.

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 52, and check box b 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 2009.

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.

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.

Amount of credit.

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.

Recapture of credit.

If the vehicle no longer qualifies for the credit, you may have to 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 53. 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 2009.

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. 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.
Electricity.

Amount of the credit.

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.

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 53. 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 to Holders of Tax Credit Bonds

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.

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.

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.

More information.

For more information, 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 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.

Limit on the credit.

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.

How to take the credit.

Complete Form 1116 and attach it to your Form 1040. Enter the credit on Form 1040, line 47.

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.

For more details on these requirements, see the instructions for Form 1116.

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 (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

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 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).

How to take the credit.

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.

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 2010. For more information about the home mortgage interest deduction, see chapter 23.

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 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.

Refundable credit.

If you have any unused minimum tax credit carryforward from 2006 or earlier years, you may qualify for a refund of that credit amount. For more information, see Refundable Credit for Prior Year Minimum Tax , later.

How to take the 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.

More information.

For more information about the credit, see the instructions for Form 8801.

Plug-in Electric Drive Motor Vehicle Credit

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.

Amount of credit.

The amount of the credit varies depending on the battery capacity and vehicle weight limitations and ranges from $2,500 to $15,000.

Qualified vehicle.

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.

How to take the credit.

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.

Plug-in Electric Vehicle Credit

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.

Amount of credit.

The credit is 10% of the cost of the vehicle, limited to $2,500 per vehicle.

Qualified vehicle.

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:
1. 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
2. Is capable of being recharged from an external source of electricity.

How to take the credit.

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.

Residential Energy Credits

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.

Nonbusiness energy property credit.

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.

Residential energy efficient property credit.

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.

Basis reduction.

You must reduce the basis of your home by the amount of any credit allowed.

How to take the credit.

Complete Form 5695 and attach it to your Form 1040. Enter the credit on Form 1040, line 52, and check box c.

More information.

For more information on this credit, see the instructions for Form 5695.

Retirement Savings Contributions Credit (Saver's 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 $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).

Student.

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.

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 50, or your Form 1040A, line 32, 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 Capital Gain Distributions in chapter 8 for more information on undistributed capital gains.

First-Time Homebuyer Credit

Credit claimed on 2008 return.

In general, you can claim this credit if:

You bought your main home in the United States after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010), and
You (and your spouse, if married) did not own any other main home during the 3-year period ending on the date of purchase.

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).

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:

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
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).

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).

Main home.

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.

Home constructed by you.

If you constructed your main home, you are treated as having bought it on the date you first occupied it.

Who cannot claim the credit.

You cannot claim the credit if any of the following apply.

You are a nonresident alien.
Your home is located outside the United States.
You sell the home, or it stops being your main home, before the end of 2009.
You acquired your home by gift or inheritance.
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.
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.
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.

Amount of the credit.

Generally, the credit is the smaller of:

$8,000 ($4,000 if married filing separately), or
10% of the purchase price of the home.

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.

Modified adjusted gross income (MAGI).

Your MAGI is the amount from Form 1040, line 38, increased by the total of any:

Exclusion of income from Puerto Rico, and
Amount from Form 2555, line 45 and line 50; Form 2555-EZ, line 18; and Form 4563, line 15.

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.

Repayment of credit.

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.

Exceptions.

The following are exceptions to the repayment rule.

If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. (See item 7 earlier under Who cannot claim the credit for the definition of a related person.) When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.
If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you do not have to repay the credit.
If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit if required.
If you die, repayment of the credit is not required. If you file a joint return and then you die, your surviving spouse must repay his or her half of the credit if required.

Home bought in 2008.

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.

How to take the credit.

To take the credit, complete Form 5405 and attach it to your Form 1040. Enter your credit on Form 1040, line 67.

How to repay the credit.

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.”

More information.

For more information, including special rules for members of the Armed Forces, see Form 5405 and its instructions.

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 (ATAA) recipient, reemployment TAA (RTAA) 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, or your portion of 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 program (FEHBP) or eligible to receive benefits under the U.S. military health system (TRICARE).
You were not covered by 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 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.

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 2009. 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 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.

RTAA recipient.

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.

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 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.

Making Work Pay Credit

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:

Your modified AGI is more than $75,000 ($150,000 if married filing jointly),
You take the government retiree credit discussed next, or
You received a $250 economic recovery payment during 2009. You may have received an economic recovery payment if you received social security benefits, supplemental security income (SSI) benefits, railroad retirement benefits, or veterans disability compensation or pension benefits.

How to take the credit.

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.

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.

How to take the credit.

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.

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.

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 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

All wages are subject to Medicare tax withholding.
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 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)

Example —

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

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)