Publication 17 (2012), Your Federal Income Tax

36. Other Credits

Table of Contents

What's New

Adoption credit. The maximum adoption credit is $12,650 for 2012. The credit is nonrefundable after 2011. See Adoption Credit .

Alternative motor vehicle credit. You cannot claim this credit for plug-in electric motor vehicle conversions after 2011. See Alternative Motor Vehicle Credit .

Plug-in electric drive motor vehicle credit. The credit is now available for certain two- or three-wheeled vehicles acquired after 2011 and before 2014. See Plug-in Electric Drive Motor Vehicle Credit .

First-time homebuyer credit. This credit has expired. If you have to repay this credit, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. You may be able to repay the credit without filing Form 5405. For more information, see the Form 1040 instructions for line 59b.

Excess withholding of social security and railroad retirement tax. Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2012 at a rate of 4.2% of wages up to $110,100. If you worked for more than one employer and had too much social security or RRTA tax withheld during 2012, you may be entitled to a credit for the excess withholding. See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld .

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.
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 31).
Credit for the elderly or the disabled (chapter 32).
Child tax credit (chapter 33).
Education credits (chapter 34).
Earned income credit (chapter 35).

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 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 Homeowners
590 Individual Retirement Arrangements (IRAs)

Form (and Instructions)

1116 Foreign Tax Credit
2439 Notice to Shareholder of Undistributed Long-Term Capital Gains
5405 Repayment of the 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 $12,650 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 $189,710, your credit is reduced. If your modified AGI is $229,710 or more, you cannot take the credit.

If you are filing Form 8839, you cannot file your income tax return and Form 8839 electronically. You must file a paper return. Mail your return to the address listed in your tax return instructions.

Documentation requirements. You should keep documentation that supports your claim for the adoption credit, but you no longer need to include any documentation when you file your tax return.

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, or
Paid or reimbursed by your employer or any other person or organization.

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 53. Check box c and enter “8839” on the line next to that box.

More information. For more information, see the Instructions for Form 8839.

Alternative Motor Vehicle Credit

You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2012.

The credit has expired for plug-in electric motor vehicle conversions made after 2011.

Amount of credit. Generally, you can rely on the manufacturer's certification that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification.

Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification of the maximum credit allowable.

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 that box.

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 2012.

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 that 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 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.

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 that box.

More information. For more information on the credit, see the Form 8911 instructions.

Credit to Holders of Tax Credit Bonds

Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond.

You may be able to take a credit if you are a holder of one of the following bonds.

Clean renewable energy bonds (issued before 2010).
New clean renewable energy bonds.
Qualified energy conservation bonds.
Qualified school construction bonds.
Qualified zone academy bonds.
Build America bonds.

In some instances, an issuer may elect to receive a credit for interest paid on the bond. If the issuer makes this election, you cannot also claim a 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 that box.

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 gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement).
If you had dividend income from shares of stock, you held those shares for at least 16 days.
You are not filing Form 4563 or excluding income from sources within Puerto Rico.
The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly).
All of your foreign taxes were:
1. Legally owed and not eligible for a refund, and
2. Paid to countries that are recognized by the United States and do not support terrorism.

More information. For more information on the credit and 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 2012 credit and any carryforward to 2013 on Form 8396, and attach it to your Form 1040. Be sure to include any credit carryforward from 2009, 2010, and 2011.

Include the credit in your total for Form 1040, line 53. Check box c and enter “8396” on the line next to that box.

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 2013. 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 the Instructions for Form 8828 and chapter 15 for more information.

More information. For more information on the credit, see the Form 8396 instructions.

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 2011 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 2012, or
An unallowed qualified electric vehicle credit.

Refundable credit. If you had a minimum tax credit carryforward to 2010 (on your 2009 Form 8801, line 30), 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 2012 nonrefundable credit (if any), and any carryforward to 2013 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 on 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 or a qualified two- or three-wheeled plug-in electric vehicle in 2012 and you meet some other requirements.

Qualified plug-in electric drive motor vehicle. This is a new vehicle with at least four wheels that:

Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and
Has a gross vehicle weight of less than 14,000 pounds.

Qualified two- or three-wheeled plug-in electric vehicle. This is a new vehicle with two or three wheels that:

Is capable of achieving a speed of 45 miles per hour or greater,
Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2.5 kilowatt hours and is capable of being recharged from an external source of electricity, and
Has a gross vehicle weight of less than 14,000 pounds.

Certification and other requirements. 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, if applicable, the amount of the credit for which it qualifies. However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement.

The following requirements must also be met to qualify for the credit.

You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.
You placed the vehicle in service during 2012.
The vehicle is manufactured primarily for use on public streets, roads, and highways.
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.
In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011.
You use the vehicle primarily in the United States.

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 that box.

More information. For more information on the credit, see the Form 8936 instructions.

Plug-in Electric Vehicle Credit

This credit has expired for plug-in electric vehicles acquired after 2011. However, if you acquired the plug-in electric vehicle in 2011, but placed it in service during 2012, you may still be able to claim the credit for 2012. For this credit, the vehicle can have 2, 3, or 4 wheels. A vehicle with 4 wheels must be a low speed vehicle.

Generally, you can rely on the manufacturer's certification that a vehicle qualifies for the credit. In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification.

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 to lease to others 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 or 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. Can be 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 that box.

More information. For more information on the credit, see the Form 8834 instructions.

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 2012.

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 equal to the sum of:

10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2012, and
Any residential energy property costs paid or incurred in 2012.

There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property.

If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2012.

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 window (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 electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; 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.

More information. For more information on these credits, see the Form 5695 instructions.

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 $28,750 ($43,125 if head of household; $57,500 if married filing jointly).
The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1995, (b) is claimed as a dependent on someone else's 2012 tax return, or (c) was a student (defined next).

Student. You were a student if during any part of 5 calendar months of 2012 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.

More information. For more information on the credit, see the Form 8880 instructions.

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 showing your share of the undistributed capital gains and the tax paid, if any.

How to take the credit. To take the credit, attach Copy B of Form 2439 to your Form 1040. Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a.

More information. See Capital Gain Distributions 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 (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals.
You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U.S. Treasury–HCTC.”
You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC.
You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP).
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 imprisoned under federal, state, or local authority.
Your employer did not pay 50% or more of the cost of coverage.
You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator.

But, you cannot take the credit if you can be claimed as a dependent on someone else's 2012 tax return. If you meet all of these conditions, you may be able to take a credit of up to 72.5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage.

You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return.

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 2012. 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 2012. 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 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 71, and check box d.

You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. For details, see Publication 502 or Form 8885.

More information. For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions.

Refundable Credit for Prior Year Minimum Tax

If you paid the alternative minimum tax for 2011 or you had a minimum tax credit carryforward to 2012, 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 2012, you may qualify for a refundable credit for prior year minimum tax if you had a minimum tax credit carryforward to 2010 (on your 2009 Form 8801, line 30) and you have not used all of that carryforward, even if the total amount of your current year credit is more than your total tax liability. To figure the amount of any 2012 refundable credit, complete Part IV of Form 8801. Include any refundable credit on Form 1040, line 71, 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 2012, 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 2012.

Type of tax	Maximum wages subject to tax	Maximum tax that should have been withheld
Social security or RRTA tier 1	$110,100	$4,624.20
RRTA tier 2	$81,900	$3,194.10

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. Use Worksheet 3-3 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 2012, figure the credit as follows:

1.	Add all social security tax withheld (but not more than $4,624.20 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, identified by “UT”
3.	Add lines 1 and 2. If $4,624.20 or less, stop here. You cannot take the credit
4.	Social security tax limit	4,624.20
5.	Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)	$

Example.

You are married and file a joint return with your spouse who had no gross income in 2012. During 2012, you worked for the Brown Technology Company and earned $60,000 in wages. Social security tax of $2,520 was withheld. You also worked for another employer in 2012 and earned $55,000 in wages. $2,310 of social security tax was withheld from these wages. Because you worked for more than one employer and your total wages were more than $110,100, you can take a credit of $205.80 for the excess social security tax withheld.

1.	Add all social security tax withheld (but not more than $4,624.20 for each employer). Enter the total here	$4,830.00
2.	Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”	-0-
3.	Add lines 1 and 2. If $4,624.20 or less, stop here. You cannot take the credit	4,830.00
4.	Social security tax limit	4,624.20
5.	Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)	$205.80

How to figure the credit if you worked for a railroad. If you were a railroad employee at any time during 2012, figure the credit as follows:

1.	Add all social security and tier 1 RRTA tax withheld (but not more than $4,624.20 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, identified by “UT”
3.	Add lines 1 and 2. If $4,624.20 or less, stop here. You cannot take the credit
4.	Social security and tier 1 RRTA tax limit	4,624.20
5.	Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)	$

How to take the credit. Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41.

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

Prev	Up	Next
	Home

More Online Publications