Publication 17 |
2008 Tax Year |
Adoption credit. The maximum adoption credit increases to $11,650. See
Adoption Credit
for more information.
Recovery rebate credit. This credit is figured like the economic stimulus payment except that your 2008 tax information is used to figure the credit,
instead of your 2007 tax information. The maximum credit is $600 ($1,200 if married filing jointly) plus $300 for each qualifying
child. The credit is reduced by any economic stimulus payment you received. See
Recovery Rebate Credit
for more information.
First-time homebuyer credit. You may be able to claim a credit of up to $7,500 if you are a first-time homebuyer and your modified adjusted gross income
is less than $95,000 ($170,000 if married filing jointly). This credit is like a loan to you. You must recapture the amount
of your 2008 credit in 15 equal yearly installments starting in 2010 (2 years after claiming the credit). See
First-Time Homebuyer Credit
for more information.
Nonbusiness energy property credit not allowed for 2008. You cannot claim the nonbusiness energy property credit for property placed in service in 2008. However, you may be able to
claim it next year for property placed in service in 2009. Also, you still may be able to claim the residential energy efficient
property credit for 2008. See
Residential Energy Efficient Property 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 $102,000 in 2008. The withholding rate of tier 2 RRTA is 3.9% of wages in 2008. The maximum
wages subject to this tax increased to $75,900 in 2008. If you had too much social security or RRTA tax withheld during 2008,
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.
This chapter discusses the following nonrefundable credits.
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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.
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Nonrefundable credit for prior year minimum tax.
-
Residential energy efficient property credit.
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Retirement savings contributions credit.
This chapter also discusses the following refundable credits.
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Credit for tax on undistributed capital gain.
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First-time homebuyer credit.
-
Health coverage tax credit.
-
Recovery rebate 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.
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Child and dependent care credit (chapter 32).
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Credit for the elderly or the disabled (chapter 33).
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Child tax credit (chapter 34).
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Education credits (chapter 35).
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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 six 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
-
5405
First-Time Homebuyer Credit
-
5695
Residential Energy Efficient Property Credit
-
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 to Holders of Tax Credit Bonds
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.
You may be able to take a tax credit of up to $11,650 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 $174,730, your credit is reduced. If your modified AGI is $214,730
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:
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Adoption fees,
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Court costs,
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Attorney fees,
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Travel expenses (including amounts spent for meals and lodging) while away from home, and
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Re-adoption expenses to adopt a foreign child.
.
Nonqualified expenses.
Qualified adoption expenses do not include expenses:
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That violate state or federal law,
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For carrying out any surrogate parenting arrangement,
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For the adoption of your spouse's child,
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For which you received funds under any federal, state, or local program,
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Allowed as a credit or deduction under any other federal income tax rule,
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Paid or reimbursed by your employer or any other person or organization, or
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Paid before 1997.
Eligible child.
The term “ eligible child” means any individual:
Child with special needs.
An eligible child is a child with special needs if all three of the following apply.
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The child was a citizen or resident of the United States (including U.S. possessions) at the time the adoption process began.
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A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her
parents' home.
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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:
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The child's ethnic background,
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The child's age,
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Whether the child is a member of a minority or sibling group, and
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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 53, 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 2008.
Alternative motor vehicle.
An alternative motor vehicle is a new vehicle that qualifies as one of the following four types of vehicles.
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Qualified hybrid vehicle.
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Advanced lean burn technology vehicle.
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Qualified alternative fuel vehicle.
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Qualified fuel cell vehicle.
Amount of credit.
Generally, for a qualified alternative fuel vehicle, an advanced lean burn technology vehicle, or 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 during the year;
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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
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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. Also see the Form 8910 instructions.
For Toyota and Lexus vehicles, no credit is allowed for 2008. For certain other vehicles the credit is reduced. See the Form
8910 instructions or 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 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 54. 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 2008.
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.
Electricity.
Electric vehicle recharging property placed in service after October 3, 2008, is eligible for the credit. See the
Form 8911 instructions for details and other property eligible for the credit.
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 54. 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:
The issuers do not pay interest on these types of 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 54. Check
box c, and enter “ 8912” on the line next to box c.
More information.
For more information, see the instructions for Form 8912.
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.
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Foreign earned income exclusion.
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Foreign housing exclusion.
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Income from Puerto Rico exempt from U.S. tax.
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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 50.
Exception.
You do not have to complete Form 1116 to take the credit if all of the following apply.
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All of your foreign source gross income was passive income, which generally includes interest and dividends.
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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.
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The total of your creditable foreign taxes was not more than $300 ($600 if married filing jointly).
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You elect this procedure for the tax year.
For more details on these requirements, see the instructions for Form 1116.
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.
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 2008 credit and any carryforward to 2009 on Form 8396, and attach it to your Form 1040. Be sure to include any
credit carryforward from 2005, 2006, and 2007.
Include the credit in your total for Form 1040, line 53, 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 2009. 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 2007 you had:
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An alternative minimum tax liability and adjustments or preferences other than exclusion items,
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A minimum tax credit that you are carrying forward to 2008, or
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An unallowed qualified electric vehicle credit.
Refundable credit.
If you have any unused minimum tax credit carryforward from 2005 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 2008 nonrefundable credit (if any), and any carryforward to 2009 on Form 8801, and attach it to your Form 1040.
Include the credit in your total for Form 1040, line 54, 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 Efficient Property Credit
You may be able to take this credit if you made energy saving improvements to your home located in the United States in 2008.
Home.
A home is where you lived in 2008 and may include a house, houseboat, mobile home, cooperative apartment, condominium,
and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.
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 this credit.
Amount of credit.
The credit is 30% of your costs of qualified:
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Solar electric property,
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Solar water heating property,
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Fuel cell property,
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Small wind energy property, and
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Geothermal heat pump property.
This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the
property to the home. The credit is limited to:
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$2,000 for qualified solar electric property costs,
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$2,000 for qualified solar water heating property costs,
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$500 for each one-half kilowatt of capacity of qualified fuel cell property for which qualified fuel cell property costs are
paid,
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$4,000 for qualified small wind energy property costs, and
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$2,000 for qualified geothermal heat pump property costs.
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 53, and check box c.
More information.
For more information on this credit, 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:
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Contributions (other than rollover contributions) to a traditional or Roth IRA,
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Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or
SIMPLE plan,
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Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or
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Contributions to a 501(c)(18)(D) plan.
However, you cannot take the credit if either of the following applies.
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The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $26,500 ($39,750 if head of household; $53,000 if married
filing jointly).
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The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1991, (b) is claimed
as a dependent on someone else's 2008 tax return, or (c) was a student (defined next).
Student.
You were a student if during any part of 5 calendar months of 2008 you:
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Were enrolled as a full-time student at a school, or
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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 51, or your Form 1040A, line 32, and attach
Form 8880 to your return.
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 68, 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
The first-time homebuyer credit operates much like an interest-free loan. You generally must repay it over a 15-year period.
See Recapture of credit later.
Who can claim the credit.
In general, you can claim the credit if you are a first-time homebuyer. You are considered a first-time homebuyer
if:
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You bought your main home in the United States after April 8, 2008, and before July 1, 2009, and
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You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
If you constructed your main home, you are treated as having bought it on the date you first occupied it.
Main home.
Your main home is the one you live in most of the time. It can be a house, houseboat, condominium, or other type of
residence.
Who cannot claim the credit.
You cannot claim the credit if any of the following apply.
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Your modified adjusted gross income is $95,000 or more ($170,000 or more if married filing jointly). See Modified adjusted gross income (MAGI) later.
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You are eligible to claim the District of Colombia first-time homebuyer credit for 2008 or any prior year.
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Your home financing comes from tax-exempt mortgage revenue bonds.
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You are a nonresident alien.
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Your home is located outside the United States.
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You sell the home, or it ceases to be your main home, before the end of 2008.
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You acquired your home by gift or inheritance.
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You acquired your home from a related person.
A related person includes:
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Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.).
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A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
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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:
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$7,500 ($3,750 if married filing separately), or
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10% of the purchase price of the home.
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 eliminated completely if MAGI is $95,000 ($170,000 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
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Amount from Form 2555, line 45 and line 50; Form 2555-EZ, line 18; and Form 4563, line 15.
Recapture of credit.
You generally must repay (recapture) the credit over a 15-year period in 15 equal installments. The recapture period
begins 2 years after the year in which you claimed the credit. Thus, if you claim the credit on your 2008 tax return, the
recapture period begins in 2010 and you must include the first installment as additional tax on your 2010 tax return.
If your home ceases to be your main home before the 15-year period is up, you must include all remaining annual installments
as additional tax on the return for the tax year that happens. This includes situations where you sell the home or convert
it to business or rental property.
For purposes of repaying the credit, each spouse filing a joint return is treated as having been allowed half the
credit.
Example 1.
You claimed a $7,500 credit on your 2008 tax return. You must include $500 ($7,500 ÷ 15) as additional tax on your 2010 tax
return and on each tax return for the next 14 years.
Example 2.
You claimed a $7,500 credit on your 2008 tax return. In 2009, you sold the home to your son. You must include $7,500 as additional
tax on your 2009 tax return.
Exceptions.
The following are exceptions to the recapture rule.
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If you sell the home to someone who is not related to you, the recapture in the year of sale is limited to the amount of gain
on the sale. When figuring the gain, reduce the adjusted basis of the home by the amount of the credit you have not recaptured.
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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 continue to recapture the credit over the rest of the 15-year recapture period.
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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 recapturing the remaining credit.
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If you die, the rest of the credit does not have to be recaptured.
How to take the credit.
To take the credit, complete Form 5405 and attach it to your Form 1040. Include your credit on Form 1040, line 69.
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.
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You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) 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.
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You were not entitled to Medicare Part A or enrolled in Medicare Part B.
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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 (CHAMPUS/TRICARE).
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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).
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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 2008 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. 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.
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:
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Received a trade readjustment allowance, or
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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 2008. 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 2008.
The program was established by the Department of Labor. You were an eligible alternative TAA recipient on the first day of
October and November.
You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply.
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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.
To take the credit, complete Form 8885 and attach it to your Form 1040. Include your credit in the total for Form 1040, line
68, 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.
This credit is figured like the economic stimulus payment you may have received in 2008 except that your 2008 tax information
is used to figure this credit. Your 2007 tax information was used to figure your economic stimulus payment.
You may be able to take this credit only if:
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You did not get an economic stimulus payment, or
-
Your economic stimulus payment was less than $600 ($1,200 if married filing jointly for 2007) plus $300 for each qualifying
child you had for 2008.
However, you do not qualify for this credit if all of the following apply.
-
You received an economic stimulus payment of $300 ($600 if married filing jointly for 2007) before any offset (see Offset against debts in chapter 1),
-
Your 2008 tax on Form 1040, line 46 (Form 1040A, line 28, or Form 1040EZ, line 11), is $300 or less ($600 or less if married
filing jointly for 2008),
-
Your 2008 filing status is the same as your 2007 filing status, and
-
You do not have any qualifying children.
Generally, the credit cannot be more than your 2008 net income tax liability (your regular tax liability plus any alternative
minimum tax (AMT), minus any nonrefundable credits you claimed other than the child tax credit). However, your credit will
be at least $300 ($600 if married filing jointly) if you meet either of the following two conditions:
-
The total of your earned income, social security benefits (including social security disability payments), tier 1 railroad
retirement benefits, certain veterans benefits, and nontaxable combat pay is at least $3,000, or
-
Your total income is more than $8,950 if your filing status is single or married filing separately ($11,500 if head of household;
$14,400 if qualifying widow(er); $17,900 if married filing jointly), and your net income tax liability is more than zero.
If you meet either of these conditions, you can also get an additional $300 for each of your children who is a qualifying
child for the child tax credit.
To be eligible, you and your spouse each must have a valid social security number. To get the additional $300 credit for a
child, the child must have a valid social security number. However, a valid social security number is not required for you,
your spouse, or any qualifying child if you file a joint return and either you or your spouse was a member of the U. S. Armed
Forces at any time in 2008. You are not eligible for the credit if you can be claimed as a dependent of another taxpayer,
or if you file Form 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS.
If your adjusted gross income (AGI) is more than $75,000 ($150,000 if married filing jointly), your credit will be reduced
by 5% of your AGI in excess of that amount.
Credit reduced or eliminated by economic stimulus payment.
Your credit is reduced by any economic stimulus payment you received in 2008. However, if your credit is less than
the stimulus payment you received, you do not have to repay the difference.
How to take the credit.
To take the credit, complete the Recovery Rebate Credit Worksheet–Line 70 in the Form 1040 instructions ( Recovery Rebate Credit Worksheet–Line 42 in the Form 1040A instructions or Recovery Rebate Credit Worksheet–Line 9 in the Form 1040-EZ instructions). Include your credit on Form 1040, line 70 (Form 1040A, line 42, or Form 1040-EZ, line
9).
Refundable Credit for Prior Year Minimum Tax
If you paid the alternative minimum tax for 2007 or you had a minimum tax credit carryforward to 2008, 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 2008, you may qualify for a refundable credit for prior year minimum tax if you have any unused minimum
tax credit carryforward from 2005 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 2008 refundable credit, complete Part IV of Form 8801. Include any refundable
credit on Form 1040, line 68, and check box c. 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 2008, 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 2008.
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 2008, figure the credit as follows:
Example.
You are married and file a joint return with your spouse who had no gross income in 2008. During 2008, 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 2008 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 $102,000, you can take a credit of $558.00 for the excess social security
tax withheld.
How to figure the credit if you worked for a railroad.
If you were a railroad employee at any time during 2008, figure the credit as follows:
How to take the credit.
Enter the credit on Form 1040, line 65, or include it in the total for Form 1040A, line 43.
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