557. What credits may be taken against the tax?Nuco Employeercline202014-07-29T18:50:00Z2014-07-29T18:50:00Z713587747UMKC6418908714Site Map/General Income Taxation/Individuals/CreditsStandard2006-01-13T00:00:00Z240612010-01-14T22:56:22ZSBMEDIA\moss-admin1436.00;#1722;#TaxFactsDefaultArticleTax Facts 2557. What credits may be taken against the tax?Editor’s Note: Many of the credits listed below contain sunset provisions so that they apply only so long as Congress chooses to renew them from year to year. As of the date of this publication, Congress has not yet acted to renew many of the provisions that expired at the end of 2013. However, taxpayers should note that Congress has a history of retroactively restoring the applicability of many of these tax credits.After rates have been applied to compute the tax, certain payments and credits may be subtracted from the tax to arrive at the amount of tax payable. Refundable credits are recoverable regardless of the amount of the taxpayer’s tax liability for the taxable year. The refundable credits include:…Taxes withheld from salaries and wages.IRC Sec. 31(a).…Overpayments of tax.IRC Sec. 35.…The excess of Social Security withheld (two or more employers).Treas. Reg. §1.31-2.…The earned income credit.IRC Sec. 32. … A portion of the child tax credit. … A portion of the American Opportunity credit.…The 72.5% health care tax credit for uninsured workers displaced by trade competition.IRC Sec. 35.…The unused long-term minimum tax credit. For 2009 and 2010, a making work pay credit was available equal to the lesser of (1) 6.2 percent of earned income or (2) $800 for a joint return and $400 for all others. The credit was reduced by 2 percent of the taxpayer’s modified adjusted gross income in excess of $150,000 for a joint return and $75,000 for all others. The credit was also reduced by certain other benefits provided by ARRA 2009. The credit was not available for nonresident aliens, for persons for whom a personal exemption was claimed on another person’s return, or an estate or trust.IRC Sec. 36A, as amended by ARRA 2009.There was a first-time homebuyer credit available for a home purchased after April 8, 2008 and through April 2010.IRC Sec. 36, as added by HERA 2008 and amended by ARRA 2009 and WHBAA 2009. The credit was available for 10 percent of the purchase price, up to certain limits. For homes purchased in 2009 and 2010, the dollar limits were $8,000 ($4,000 for a married individual filing separately). However, for a home purchased after November 6, 2009 by a long-time resident treated as a first-time homebuyer, the dollar limit was only $6,500 ($3,250 for a married individual filing separate). For a home purchased before November 7, 2009, the credit was phased out based on AGI of $75,000 to $95,000 ($150,000 to $170,000 for a joint return). For a home purchased after November 6, 2009, the credit was phased out based on AGI of $125,000 to $145,000 ($225,000 to $245,000 for a joint return). For a home purchased after November 6, 2009, the credit was not available to a person for whom a personal exemption was allowable to another person. The credit was not available for a home purchased after November 6, 2009 if the purchase price exceeded $800,000. For a home purchased in 2008, the credit must generally be recaptured over a 15-year period beginning with the second year after the home is purchased. The recapture is accelerated if the home is sold or is no longer the taxpayer’s principal residence. Credit recapture does not apply to a home purchased in 2009 or 2010 unless the home was disposed of, or ceases to be used as a primary residence, within three years of purchase. For a first-time homebuyer’s credit that can be properly claimed in a year after 2008, the taxpayer can elect to claim the credit as of December 31 of the previous year.The nonrefundable credits are as follows:…The personal credits—which consist of the child and dependent care credit;IRC Sec. 21. the credit for the elderly and the permanently and totally disabled;IRC Sec. 22. the qualified adoption credit;IRC Sec. 23. the nonrefundable portion of the child tax credit;See IRC Sec. 24. the American Opportunity (extended under ATRA through 2017), Hope Scholarship, and Lifetime Learning creditsIRC Sec. 25A, as amended by ATRA, Sec. 103. (see Q 560); the credit for elective deferrals and IRA contributions (the “saver’s credit,” which became permanent under PPA 2006)IRC Sec. 25B.;…The nonbusiness energy property credit (retroactively extended under ATRA for 2012 and 2013)IRC Sec. 25C, as amended by ATRA, Sec. 401.; and the residential energy efficient property creditIRC Sec. 25D..…Other nonbusiness credits.See e.g., IRC Secs. 53, 901.…The general business credit (see Q 7814) is the sum of the following credits determined for the taxable year: (1) the investment credit determined under IRC Section 46 (see Q 7821) (including the rehabilitation credit; see Q 7758); (2) the work opportunity credit determined under IRC Section 51(a) (retroactively extended under ATRA for 2012 and 2013); (3) the alcohol fuels credit determined under IRC Section 40(a); (4) the research credit (retroactively extended under ATRA for 2012 and 2013) determined under IRC Section 41(a); (5) the low-income housing credit (see Q 7751) determined under IRC Section 42(a); (6) the enhanced oil recovery credit (see Q 7814) under IRC Section 43(a); (7) in the case of an eligible small business, the disabled access credit determined under IRC Section 44(a); (8) the renewable electricity production credit under IRC Section 45(a) (extended only through 2009 under EIEA 2008); (9) the empowerment zone employment credit determined under IRC Section 1396(a) (retroactively extended under ATRA for 2012 and 2013); (10) the Indian employment credit as determined under IRC Section 45A(a) (retroactively extended under ATRA for 2012 and 2013); (11) the employer Social Security credit determined under IRC Section 45B(a); (12) the orphan drug credit determined under IRC Section 45C(a); (13) the new markets tax credit determined under IRC Section 45D(a) (retroactively extended under ATRA for 2012 and 2013); (14) in the case of an eligible employer (as defined in IRC Section 45E(c)); the small employer pension plan startup cost credit determined under IRC Section 45E(a); (15) the employer-provided child care credit determined under IRC Section 45F(a); (16) the railroad track maintenance credit determined under IRC Section 45G(a) (retroactively extended under ATRA for 2012 and 2013); (17) the biodiesel fuels credit determined under IRC Section 40A(a) (retroactively extended under ATRA for 2012 and 2013); (18) the low sulfur diesel fuel production credit determined under IRC Section 45H(a); (19) the marginal oil and gas well production credit determined under IRC Section 45I(a); (20) for tax years beginning after September 20, 2005, the distilled spirits credit determined under IRC Section 5011(a); (21) for tax year beginning after August 8, 2005, the advanced nuclear power facility production credit determined under IRC Section 45J(a); (22) for property placed in service after December 31, 2005, the nonconventional source production credit determined under IRC Section 45K(a); (23) the energy efficient home credit determined under IRC Section 45L(a) (extended through 2013); (24) the energy efficient appliance credit determined under IRC Section 45M(a) (extended through 2013); (25) the portion of the alternative motor vehicle credit to which IRC Section 30B(g)(1) applies; and (26) the portion of the alternative fuel vehicle refueling property credit to which IRC Section 30C(d)(1) applies (extended through 2013).IRC Sec. 38(b).ETIA 2005 provides an alternative motor vehicle credit for qualified fuel cell vehicles, advanced lean-burn technology vehicles, qualified hybrid vehicles, and qualified alternative fuel vehicles.IRC Sec. 30B. (This credit replaced the prior deduction for qualified clean-fuel vehicle property, which expired on December 31, 2005.)See Sec. 1348, ETIA 2005; IRC Sec. 179A. The portion of the credit attributable to vehicles of a character subject to an allowance for depreciation is treated as a portion of the general business credit; the remainder of the credit is a personal credit allowable to the extent of the excess of the regular tax (reduced by certain other credits) over the alternative minimum tax for the taxable year.See IRC Sec. 30B(g).For new qualified plug-in electric drive motor vehicles acquired and placed in service after 2009, a credit is available. The credit can vary from $2,500 to $7,500 depending on battery capacity (and subject to phaseout based on number of vehicles sold by the manufacturer). The portion of the credit attributable to property of a character subject to an allowance for depreciation is treated as part of the general business credit. The balance of the credit is generally treated as a nonrefundable personal credit.IRC Sec. 30D, as amended by ARRA 2009. An alternative credit is available for certain plug-in electric cars placed in service after February 17, 2009 and before 2014 (retroactively extended under ATRA for 2012 and 2013). This credit is equal to 10 percent of cost, up to $2,500.IRC Sec. 30, as amended by ARRA 2009 and ATRA.