Subpart A—Nonrefundable Personal Credits
Amendments
1998—
1997—
1996—
1990—
1986—
1984—
1983—
1982—
1981—
1980—
1978—
1977—
1976—
1975—
1971—
1970—
1965—
1964—
1962—
Subpart Referred to in Other Sections
This subpart is referred to in
§21. Expenses for household and dependent care services necessary for gainful employment
(a) Allowance of credit
(1) In general
In the case of an individual who maintains a household which includes as a member one or more qualifying individuals (as defined in subsection (b)(1)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses (as defined in subsection (b)(2)) paid by such individual during the taxable year.
(2) Applicable percentage defined
For purposes of paragraph (1), the term "applicable percentage" means 30 percent reduced (but not below 20 percent) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $10,000.
(b) Definitions of qualifying individual and employment-related expenses
For purposes of this section—
(1) Qualifying individual
The term "qualifying individual" means—
(A) a dependent of the taxpayer who is under the age of 13 and with respect to whom the taxpayer is entitled to a deduction under section 151(c),
(B) a dependent of the taxpayer who is physically or mentally incapable of caring for himself, or
(C) the spouse of the taxpayer, if he is physically or mentally incapable of caring for himself.
(2) Employment-related expenses
(A) In general
The term "employment-related expenses" means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:
(i) expenses for household services, and
(ii) expenses for the care of a qualifying individual.
Such term shall not include any amount paid for services outside the taxpayer's household at a camp where the qualifying individual stays overnight.
(B) Exception
Employment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer's household shall be taken into account only if incurred for the care of—
(i) a qualifying individual described in paragraph (1)(A), or
(ii) a qualifying individual (not described in paragraph (1)(A)) who regularly spends at least 8 hours each day in the taxpayer's household.
(C) Dependent care centers
Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the taxpayer's household by a dependent care center (as defined in subparagraph (D)) shall be taken into account only if—
(i) such center complies with all applicable laws and regulations of a State or unit of local government, and
(ii) the requirements of subparagraph (B) are met.
(D) Dependent care center defined
For purposes of this paragraph, the term "dependent care center" means any facility which—
(i) provides care for more than six individuals (other than individuals who reside at the facility), and
(ii) receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit).
(c) Dollar limit on amount creditable
The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed—
(1) $2,400 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or
(2) $4,800 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2) (whichever is applicable) shall be reduced by the aggregate amount excludable from gross income under section 129 for the taxable year.
(d) Earned income limitation
(1) In general
Except as otherwise provided in this subsection, the amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed—
(A) in the case of an individual who is not married at the close of such year, such individual's earned income for such year, or
(B) in the case of an individual who is married at the close of such year, the lesser of such individual's earned income or the earned income of his spouse for such year.
(2) Special rule for spouse who is a student or incapable of caring for himself
In the case of a spouse who is a student or a qualifying individual described in subsection (b)(1)(C), for purposes of paragraph (1), such spouse shall be deemed for each month during which such spouse is a full-time student at an educational institution, or is such a qualifying individual, to be gainfully employed and to have earned income of not less than—
(A) $200 if subsection (c)(1) applies for the taxable year, or
(B) $400 if subsection (c)(2) applies for the taxable year.
In the case of any husband and wife, this paragraph shall apply with respect to only one spouse for any one month.
(e) Special rules
For purposes of this section—
(1) Maintaining household
An individual shall be treated as maintaining a household for any period only if over half the cost of maintaining the household for such period is furnished by such individual (or, if such individual is married during such period, is furnished by such individual and his spouse).
(2) Married couples must file joint return
If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and his spouse file a joint return for the taxable year.
(3) Marital status
An individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.
(4) Certain married individuals living apart
If—
(A) an individual who is married and who files a separate return—
(i) maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a qualifying individual, and
(ii) furnishes over half of the cost of maintaining such household during the taxable year, and
(B) during the last 6 months of such taxable year such individual's spouse is not a member of such household,
such individual shall not be considered as married.
(5) Special dependency test in case of divorced parents, etc.
If—
(A) paragraph (2) or (4) of section 152(e) applies to any child with respect to any calendar year, and
(B) such child is under the age of 13 or is physically or mentally incapable of caring for himself,
in the case of any taxable year beginning in such calendar year, such child shall be treated as a qualifying individual described in subparagraph (A) or (B) of subsection (b)(1) (whichever is appropriate) with respect to the custodial parent (within the meaning of section 152(e)(1)), and shall not be treated as a qualifying individual with respect to the noncustodial parent.
(6) Payments to related individuals
No credit shall be allowed under subsection (a) for any amount paid by the taxpayer to an individual—
(A) with respect to whom, for the taxable year, a deduction under section 151(c) (relating to deduction for personal exemptions for dependents) is allowable either to the taxpayer or his spouse, or
(B) who is a child of the taxpayer (within the meaning of section 151(c)(3)) who has not attained the age of 19 at the close of the taxable year.
For purposes of this paragraph, the term "taxable year" means the taxable year of the taxpayer in which the service is performed.
(7) Student
The term "student" means an individual who during each of 5 calendar months during the taxable year is a full-time student at an educational organization.
(8) Educational organization
The term "educational organization" means an educational organization described in section 170(b)(1)(A)(ii).
(9) Identifying information required with respect to service provider
No credit shall be allowed under subsection (a) for any amount paid to any person unless—
(A) the name, address, and taxpayer identification number of such person are included on the return claiming the credit, or
(B) if such person is an organization described in section 501(c)(3) and exempt from tax under section 501(a), the name and address of such person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required.
(10) Identifying information required with respect to qualifying individuals
No credit shall be allowed under this section with respect to any qualifying individual unless the TIN of such individual is included on the return claiming the credit.
(f) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.
(Added
Prior Provisions
A prior section 21 was renumbered
Amendments
1996—Subsec. (e)(10).
1988—Subsec. (b)(1)(A).
Subsec. (c).
Subsec. (e)(5)(B).
Subsec. (e)(9).
1987—Subsec. (b)(2)(A).
1986—Subsecs. (b)(1)(A), (e)(6)(A).
Subsec. (e)(6)(B).
1984—
Subsec. (a)(1).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (d)(2).
Subsec. (d)(2)(A).
Subsec. (d)(2)(B).
Subsec. (e).
Subsec. (e)(5).
"(A) paragraph (2) or (4) of section 152(e) applies to any child with respect to any calendar year, and
"(B) such child is under the age of 15 or is physically or mentally incapable of caring for himself,"
for former provisions:
"(A) a child (as defined in section 151(e)(3)) who is under the age of 15 or who is physically or mentally incapable of caring for himself receives over half of his support during the calendar year from his parents who are divorced or legally separated under a decree of divorce or separate maintenance or who are separated under a written separation agreement, and
"(B) such child is in the custody of one or both of his parents for more than one-half of the calendar year."
and substituted in concluding text "(whichever is appropriate) with respect to the custodial parent (within the meaning of section 152(e)(1)), and shall not be treated as a qualifying individual with respect to the noncustodial parent" for ", as the case may be, with respect to that parent who has custody for a longer period during such calendar year than the other parent, and shall not be treated as being a qualifying individual with respect to such other parent."
Subsecs. (f), (g).
1983—Subsec. (b)(2).
1981—Subsec. (a).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C), (D).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (e)(2)(A).
Subsec. (e)(2)(B).
1978—Subsec. (f)(6).
Effective Date of 1996 Amendment
Section 1615(d) of
"(1)
"(2)
Effective Date of 1988 Amendment
Section 703(d) of
Effective Date of 1987 Amendment
Section 10101(b) of
"(1)
"(2)
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 423(c)(4) of
Section 475(a) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
Section 124(f) of
"(1) Except as provided in paragraph (2), the amendments made by this section [amending this section and enacting
"(2) The amendments made by subsection (e)(2) [amending
Effective Date of 1978 Amendment
Section 121(b) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1975, see section 508 of
Program To Increase Public Awareness
Section Referred to in Other Sections
This section is referred to in
§22. Credit for the elderly and the permanently and totally disabled
(a) General rule
In the case of a qualified individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of such individual's section 22 amount for such taxable year.
(b) Qualified individual
For purposes of this section, the term "qualified individual" means any individual—
(1) who has attained age 65 before the close of the taxable year, or
(2) who retired on disability before the close of the taxable year and who, when he retired, was permanently and totally disabled.
(c) Section 22 amount
For purposes of subsection (a)—
(1) In general
An individual's section 22 amount for the taxable year shall be the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (d).
(2) Initial amount
(A) In general
Except as provided in subparagraph (B), the initial amount shall be—
(i) $5,000 in the case of a single individual, or a joint return where only one spouse is a qualified individual,
(ii) $7,500 in the case of a joint return where both spouses are qualified individuals, or
(iii) $3,750 in the case of a married individual filing a separate return.
(B) Limitation in case of individuals who have not attained age 65
(i) In general
In the case of a qualified individual who has not attained age 65 before the close of the taxable year, except as provided in clause (ii), the initial amount shall not exceed the disability income for the taxable year.
(ii) Special rules in case of joint return
In the case of a joint return where both spouses are qualified individuals and at least one spouse has not attained age 65 before the close of the taxable year—
(I) if both spouses have not attained age 65 before the close of the taxable year, the initial amount shall not exceed the sum of such spouses' disability income, or
(II) if one spouse has attained age 65 before the close of the taxable year, the initial amount shall not exceed the sum of $5,000 plus the disability income for the taxable year of the spouse who has not attained age 65 before the close of the taxable year.
(iii) Disability income
For purposes of this subparagraph, the term "disability income" means the aggregate amount includable in the gross income of the individual for the taxable year under section 72 or 105(a) to the extent such amount constitutes wages (or payments in lieu of wages) for the period during which the individual is absent from work on account of permanent and total disability.
(3) Reduction
(A) In general
The reduction under this paragraph is an amount equal to the sum of the amounts received by the individual (or, in the case of a joint return, by either spouse) as a pension or annuity or as a disability benefit—
(i) which is excluded from gross income and payable under—
(I) title II of the Social Security Act,
(II) the Railroad Retirement Act of 1974, or
(III) a law administered by the Veterans' Administration, or
(ii) which is excluded from gross income under any provision of law not contained in this title.
No reduction shall be made under clause (i)(III) for any amount described in section 104(a)(4).
(B) Treatment of certain workmen's compensation benefits
For purposes of subparagraph (A), any amount treated as a social security benefit under section 86(d)(3) shall be treated as a disability benefit received under title II of the Social Security Act.
(d) Adjusted gross income limitation
If the adjusted gross income of the taxpayer exceeds—
(1) $7,500 in the case of a single individual,
(2) $10,000 in the case of a joint return, or
(3) $5,000 in the case of a married individual filing a separate return,
the section 22 amount shall be reduced by one-half of the excess of the adjusted gross income over $7,500, $10,000, or $5,000, as the case may be.
(e) Definitions and special rules
For purposes of this section—
(1) Married couple must file joint return
Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the credit provided by this section shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year.
(2) Marital status
Marital status shall be determined under section 7703.
(3) Permanent and total disability defined
An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.
(f) Nonresident alien ineligible for credit
No credit shall be allowed under this section to any nonresident alien.
(Aug. 16, 1954, ch. 736,
References in Text
The Social Security Act, referred to in subsec. (c)(3)(A)(i)(I), (B), is act Aug. 14, 1935, ch. 531,
The Railroad Retirement Act of 1974, referred to in subsec. (c)(3)(A)(i)(II), is act Aug. 29, 1935, ch. 812, as amended generally by
Amendments
1986—Subsec. (e)(2).
1984—
Subsec. (a).
Subsec. (c).
Subsec. (c)(1).
Subsec. (d).
1983—
Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
1981—Subsec. (e)(9)(B).
1978—Subsec. (e)(2).
Subsec. (e)(4)(B).
Subsec. (e)(5)(B).
Subsec. (e)(8), (9).
1976—
1974—Subsec. (c)(1)(E), (F).
1964—Subsec. (a).
Subsecs. (i), (j).
1962—Subsec. (c)(1).
Subsec. (d).
1956—Subsec. (d)(2). Act Jan. 28, 1956, reduced from 75 to 72 the age at which there will be no limitation on earned income and increased from $900 to $1,200 the amount that an individual over 65 can earn without reducing the $1,200 on which the retirement credit is computed.
1955—Subsec. (f). Act Aug. 9, 1955, extended the retirement income tax credit to members of the Armed Forces.
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 474(d) of
Effective Date of 1983 Amendment
Section 122(d) of
"(1)
"(2)
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1978 Amendment
Section 701(a)(4) of
"(A) The amendments made by paragraphs (1) and (2) [amending this section] shall apply to taxable years beginning after December 31, 1975.
"(B) The amendments made by paragraph (3) [amending this section] shall apply to taxable years beginning after December 31, 1977."
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1974 Amendment
Amendment by
Effective Date of 1964 Amendment
Amendment by section 113(a) of
Section 201(e) of
Section 202(b) of
Effective Date of 1962 Amendments
Section 2 of
Section 8 of
Effective Date of 1956 Amendment
Section 2 of act Jan. 28, 1956, provided that: "The amendment made by the first section of this Act [amending this section] shall apply only with respect to taxable years beginning after December 31, 1955."
Effective Date of 1955 Amendment
Section 2 of act Aug. 9, 1955, provided that: "The amendment made by this Act [amending this section] shall be applicable to taxable years beginning after December 31, 1954."
Determination of Retirement Income Credit Under Provisions as They Existed Prior to Amendment by Pub. L. 94–455 Election
Cross References
Dividends received credit not allowed on distributions of electing small business corporations, see
Disallowance of credit where tax is computed by Secretary or his delegate, see
Section Referred to in Other Sections
This section is referred to in
§23. Adoption expenses
(a) Allowance of credit
(1) In general
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter the amount of the qualified adoption expenses paid or incurred by the taxpayer.
(2) Year credit allowed
The credit under paragraph (1) with respect to any expense shall be allowed—
(A) in the case of any expense paid or incurred before the taxable year in which such adoption becomes final, for the taxable year following the taxable year during which such expense is paid or incurred, and
(B) in the case of an expense paid or incurred during or after the taxable year in which such adoption becomes final, for the taxable year in which such expense is paid or incurred.
(b) Limitations
(1) Dollar limitation
The aggregate amount of qualified adoption expenses which may be taken into account under subsection (a) for all taxable years with respect to the adoption of a child by the taxpayer shall not exceed $5,000 ($6,000, in the case of a child with special needs).
(2) Income limitation
(A) In general
The amount allowable as a credit under subsection (a) for any taxable year (determined without regard to subsection (c)) shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this paragraph but with regard to paragraph (1)) as—
(i) the amount (if any) by which the taxpayer's adjusted gross income exceeds $75,000, bears to
(ii) $40,000.
(B) Determination of adjusted gross income
For purposes of subparagraph (A), adjusted gross income shall be determined without regard to sections 911, 931, and 933.
(3) Denial of double benefit
(A) In general
No credit shall be allowed under subsection (a) for any expense for which a deduction or credit is allowed under any other provision of this chapter.
(B) Grants
No credit shall be allowed under subsection (a) for any expense to the extent that funds for such expense are received under any Federal, State, or local program.
(c) Carryforwards of unused credit
If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and section 1400C), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year. No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.
(d) Definitions
For purposes of this section—
(1) Qualified adoption expenses
The term "qualified adoption expenses" means reasonable and necessary adoption fees, court costs, attorney fees, and other expenses—
(A) which are directly related to, and the principal purpose of which is for, the legal adoption of an eligible child by the taxpayer,
(B) which are not incurred in violation of State or Federal law or in carrying out any surrogate parenting arrangement,
(C) which are not expenses in connection with the adoption by an individual of a child who is the child of such individual's spouse, and
(D) which are not reimbursed under an employer program or otherwise.
(2) Eligible child
The term "eligible child" means any individual—
(A) who—
(i) has not attained age 18, or
(ii) is physically or mentally incapable of caring for himself, and
(B) in the case of qualified adoption expenses paid or incurred after December 31, 2001, who is a child with special needs.
(3) Child with special needs
The term "child with special needs" means any child if—
(A) a State has determined that the child cannot or should not be returned to the home of his parents,
(B) such State has determined that there exists with respect to the child a specific factor or condition (such as his ethnic background, age, or membership in a minority or sibling group, or the presence of factors such as medical conditions or physical, mental, or emotional handicaps) because of which it is reasonable to conclude that such child cannot be placed with adoptive parents without providing adoption assistance, and
(C) such child is a citizen or resident of the United States (as defined in section 217(h)(3)).
(e) Special rules for foreign adoptions
In the case of an adoption of a child who is not a citizen or resident of the United States (as defined in section 217(h)(3))—
(1) subsection (a) shall not apply to any qualified adoption expense with respect to such adoption unless such adoption becomes final, and
(2) any such expense which is paid or incurred before the taxable year in which such adoption becomes final shall be taken into account under this section as if such expense were paid or incurred during such year.
(f) Filing requirements
(1) Married couples must file joint returns
Rules similar to the rules of paragraphs (2), (3), and (4) of section 21(e) shall apply for purposes of this section.
(2) Taxpayer must include TIN
(A) In general
No credit shall be allowed under this section with respect to any eligible child unless the taxpayer includes (if known) the name, age, and TIN of such child on the return of tax for the taxable year.
(B) Other methods
The Secretary may, in lieu of the information referred to in subparagraph (A), require other information meeting the purposes of subparagraph (A), including identification of an agent assisting with the adoption.
(g) Basis adjustments
For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
(h) Regulations
The Secretary shall prescribe such regulations as may be appropriate to carry out this section and section 137, including regulations which treat unmarried individuals who pay or incur qualified adoption expenses with respect to the same child as 1 taxpayer for purposes of applying the dollar limitation in subsection (b)(1) of this section and in section 137(b)(1).
(Added
Prior Provisions
A prior section 23, added
Amendments
1998—Subsec. (b)(2)(A).
Subsec. (c).
1997—Subsec. (a)(2).
"(A) for the taxable year following the taxable year during which such expense is paid or incurred, or
"(B) in the case of an expense which is paid or incurred during the taxable year in which the adoption becomes final, for such taxable year."
Subsec. (b)(2)(B).
"(i) without regard to sections 911, 931, and 933, and
"(ii) after the application of sections 86, 135, 137, 219, and 469."
Effective Date of 1998 Amendment
Amendment by section 6008(d)(6) of
Effective Date of 1997 Amendment
Section 1601(j) of
"(1)
"(2)
Effective Date
Section 1807(e) of
Tax Credit and Gross Income Exclusion Study and Report
Section 1807(d) of
Section Referred to in Other Sections
This section is referred to in
§24. Child tax credit
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to each qualifying child of the taxpayer an amount equal to $500 ($400 in the case of taxable years beginning in 1998).
(b) Limitation based on adjusted gross income
(1) In general
The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term "modified adjusted gross income" means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.
(2) Threshold amount
For purposes of paragraph (1), the term "threshold amount" means—
(A) $110,000 in the case of a joint return,
(B) $75,000 in the case of an individual who is not married, and
(C) $55,000 in the case of a married individual filing a separate return.
For purposes of this paragraph, marital status shall be determined under section 7703.
(c) Qualifying child
For purposes of this section—
(1) In general
The term "qualifying child" means any individual if—
(A) the taxpayer is allowed a deduction under section 151 with respect to such individual for the taxable year,
(B) such individual has not attained the age of 17 as of the close of the calendar year in which the taxable year of the taxpayer begins, and
(C) such individual bears a relationship to the taxpayer described in section 32(c)(3)(B).
(2) Exception for certain noncitizens
The term "qualifying child" shall not include any individual who would not be a dependent if the first sentence of section 152(b)(3) were applied without regard to all that follows "resident of the United States".
(d) Additional credit for families with 3 or more children
(1) In general
In the case of a taxpayer with three or more qualifying children for any taxable year, the aggregate credits allowed under subpart C shall be increased by the lesser of—
(A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a); or
(B) the amount by which the aggregate amount of credits allowed by this subpart (without regard to this subsection) would increase if the limitation imposed by section 26(a) were increased by the excess (if any) of—
(i) the taxpayer's Social Security taxes for the taxable year, over
(ii) the credit allowed under section 32 (determined without regard to subsection (n)) for the taxable year.
The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a).
(2) Reduction of credit to taxpayer subject to alternative minimum tax
For taxable years beginning after December 31, 2001, the credit determined under this subsection for the taxable year shall be reduced by the excess (if any) of—
(A) the amount of tax imposed by section 55 (relating to alternative minimum tax) with respect to such taxpayer for such taxable year, over
(B) the amount of the reduction under section 32(h) with respect to such taxpayer for such taxable year.
(3) Social security taxes
For purposes of paragraph (1)—
(A) In general
The term "social security taxes" means, with respect to any taxpayer for any taxable year—
(i) the amount of the taxes imposed by sections 3101 and 3201(a) on amounts received by the taxpayer during the calendar year in which the taxable year begins,
(ii) 50 percent of the taxes imposed by section 1401 on the self-employment income of the taxpayer for the taxable year, and
(iii) 50 percent of the taxes imposed by section 3211(a)(1) on amounts received by the taxpayer during the calendar year in which the taxable year begins.
(B) Coordination with special refund of social security taxes
The term "social security taxes" shall not include any taxes to the extent the taxpayer is entitled to a special refund of such taxes under section 6413(c).
(C) Special rule
Any amounts paid pursuant to an agreement under section 3121(l) (relating to agreements entered into by American employers with respect to foreign affiliates) which are equivalent to the taxes referred to in subparagraph (A)(i) shall be treated as taxes referred to in such subparagraph.
(e) Identification requirement
No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the name and taxpayer identification number of such qualifying child on the return of tax for the taxable year.
(f) Taxable year must be full taxable year
Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.
(Added
Prior Provisions
A prior section 24, added
Amendments
1999—Subsec. (d)(2).
1998—Subsec. (d)(1).
"(A) the amount of the credit allowed under this section (without regard to this subsection and after application of the limitation under section 26), or
"(B) the alternative credit amount determined under paragraph (2)."
Subsec. (d)(2).
Subsec. (d)(3).
"(A) increased by the taxpayer's social security taxes for such taxable year, and
"(B) reduced by the sum of—
"(i) the credits allowed under this part other than under subpart C or this section, and
"(ii) the credit allowed under section 32 without regard to subsection (m) thereof."
Subsec. (d)(4).
Subsec. (d)(5).
Effective Date of 1999 Amendment
Effective Date of 1998 Amendments
Amendment by
Effective Date
Section 101(e) of
Section Referred to in Other Sections
This section is referred to in
§25. Interest on certain home mortgages
(a) Allowance of credit
(1) In general
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the product of—
(A) the certificate credit rate, and
(B) the interest paid or accrued by the taxpayer during the taxable year on the remaining principal of the certified indebtedness amount.
(2) Limitation where credit rate exceeds 20 percent
(A) In general
If the certificate credit rate exceeds 20 percent, the amount of the credit allowed to the taxpayer under paragraph (1) for any taxable year shall not exceed $2,000.
(B) Special rule where 2 or more persons hold interests in residence
If 2 or more persons hold interests in any residence, the limitation of subparagraph (A) shall be allocated among such persons in proportion to their respective interests in the residence.
(b) Certificate credit rate; certified indebtedness amount
For purposes of this section—
(1) Certificate credit rate
The term "certificate credit rate" means the rate of the credit allowable by this section which is specified in the mortgage credit certificate.
(2) Certified indebtedness amount
The term "certified indebtedness amount" means the amount of indebtedness which is—
(A) incurred by the taxpayer—
(i) to acquire the principal residence of the taxpayer,
(ii) as a qualified home improvement loan (as defined in section 143(k)(4)) with respect to such residence, or
(iii) as a qualified rehabilitation loan (as defined in section 143(k)(5)) with respect to such residence, and
(B) specified in the mortgage credit certificate.
(c) Mortgage credit certificate; qualified mortgage credit certificate program
For purposes of this section—
(1) Mortgage credit certificate
The term "mortgage credit certificate" means any certificate which—
(A) is issued under a qualified mortgage credit certificate program by the State or political subdivision having the authority to issue a qualified mortgage bond to provide financing on the principal residence of the taxpayer,
(B) is issued to the taxpayer in connection with the acquisition, qualified rehabilitation, or qualified home improvement of the taxpayer's principal residence,
(C) specifies—
(i) the certificate credit rate, and
(ii) the certified indebtedness amount, and
(D) is in such form as the Secretary may prescribe.
(2) Qualified mortgage credit certificate program
(A) In general
The term "qualified mortgage credit certificate program" means any program—
(i) which is established by a State or political subdivision thereof for any calendar year for which it is authorized to issue qualified mortgage bonds,
(ii) under which the issuing authority elects (in such manner and form as the Secretary may prescribe) not to issue an amount of private activity bonds which it may otherwise issue during such calendar year under section 146,
(iii) under which the indebtedness certified by mortgage credit certificates meets the requirements of the following subsections of section 143 (as modified by subparagraph (B) of this paragraph):
(I) subsection (c) (relating to residence requirements),
(II) subsection (d) (relating to 3-year requirement),
(III) subsection (e) (relating to purchase price requirement),
(IV) subsection (f) (relating to income requirements),
(V) subsection (h) (relating to portion of loans required to be placed in targeted areas), and
(VI) paragraph (1) of subsection (i) (relating to other requirements),
(iv) under which no mortgage credit certificate may be issued with respect to any residence any of the financing of which is provided from the proceeds of a qualified mortgage bond or a qualified veterans' mortgage bond,
(v) except to the extent provided in regulations, which is not limited to indebtedness incurred from particular lenders,
(vi) except to the extent provided in regulations, which provides that a mortgage credit certificate is not transferrable, and
(vii) if the issuing authority allocates a block of mortgage credit certificates for use in connection with a particular development, which requires the developer to furnish to the issuing authority and the homebuyer a certificate that the price for the residence is no higher than it would be without the use of a mortgage credit certificate.
Under regulations, rules similar to the rules of subparagraphs (B) and (C) of section 143(a)(2) shall apply to the requirements of this subparagraph.
(B) Modifications of section 143
Under regulations prescribed by the Secretary, in applying section 143 for purposes of subclauses (II), (IV), and (V) of subparagraph (A)(iii)—
(i) each qualified mortgage certificate credit program shall be treated as a separate issue,
(ii) the product determined by multiplying—
(I) the certified indebtedness amount of each mortgage credit certificate issued under such program, by
(II) the certificate credit rate specified in such certificate,
shall be treated as proceeds of such issue and the sum of such products shall be treated as the total proceeds of such issue, and
(iii) paragraph (1) of section 143(d) shall be applied by substituting "100 percent" for "95 percent or more".
Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 95-percent requirement of section 143(d)(1) and the Secretary is satisfied that such requirement will be met under such plan.
(d) Determination of certificate credit rate
For purposes of this section—
(1) In general
The certificate credit rate specified in any mortgage credit certificate shall not be less than 10 percent or more than 50 percent.
(2) Aggregate limit on certificate credit rates
(A) In general
In the case of each qualified mortgage credit certificate program, the sum of the products determined by multiplying—
(i) the certified indebtedness amount of each mortgage credit certificate issued under such program, by
(ii) the certificate credit rate with respect to such certificate,
shall not exceed 25 percent of the nonissued bond amount.
(B) Nonissued bond amount
For purposes of subparagraph (A), the term "nonissued bond amount" means, with respect to any qualified mortgage credit certificate program, the amount of qualified mortgage bonds which the issuing authority is otherwise authorized to issue and elects not to issue under subsection (c)(2)(A)(ii).
(e) Special rules and definitions
For purposes of this section—
(1) Carryforward of unused credit
(A) In general
If the credit allowable under subsection (a) for any taxable year exceeds the applicable tax limit for such taxable year, such excess shall be a carryover to each of the 3 succeeding taxable years and, subject to the limitations of subparagraph (B), shall be added to the credit allowable by subsection (a) for such succeeding taxable year.
(B) Limitation
The amount of the unused credit which may be taken into account under subparagraph (A) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of—
(i) the credit allowable under subsection (a) for such taxable year determined without regard to this paragraph, and
(ii) the amounts which, by reason of this paragraph, are carried to such taxable year and are attributable to taxable years before the unused credit year.
(C) Applicable tax limit
For purposes of this paragraph, the term "applicable tax limit" means the limitation imposed by section 26(a) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23 and 1400C).
(2) Indebtedness not treated as certified where certain requirements not in fact met
Subsection (a) shall not apply to any indebtedness if all the requirements of subsection (c)(1), (d), (e), (f), and (i) of section 143 and clauses (iv), (v), and (vii) of subsection (c)(2)(A), were not in fact met with respect to such indebtedness. Except to the extent provided in regulations, the requirements described in the preceding sentence shall be treated as met if there is a certification, under penalty of perjury, that such requirements are met.
(3) Period for which certificate in effect
(A) In general
Except as provided in subparagraph (B), a mortgage credit certificate shall be treated as in effect with respect to interest attributable to the period—
(i) beginning on the date such certificate is issued, and
(ii) ending on the earlier of the date on which—
(I) the certificate is revoked by the issuing authority, or
(II) the residence to which such certificate relates ceases to be the principal residence of the individual to whom the certificate relates.
(B) Certificate invalid unless indebtedness incurred within certain period
A certificate shall not apply to any indebtedness which is incurred after the close of the second calendar year following the calendar year for which the issuing authority made the applicable election under subsection (c)(2)(A)(ii).
(C) Notice to Secretary when certificate revoked
Any issuing authority which revokes any mortgage credit certificate shall notify the Secretary of such revocation at such time and in such manner as the Secretary shall prescribe by regulations.
(4) Reissuance of mortgage credit certificates
The Secretary may prescribe regulations which allow the administrator of a mortgage credit certificate program to reissue a mortgage credit certificate specifying a certified mortgage indebtedness that replaces the outstanding balance of the certified mortgage indebtedness specified on the original certificate to any taxpayer to whom the original certificate was issued, under such terms and conditions as the Secretary determines are necessary to ensure that the amount of the credit allowable under subsection (a) with respect to such reissued certificate is equal to or less than the amount of credit which would be allowable under subsection (a) with respect to the original certificate for any taxable year ending after such reissuance.
(5) Public notice that certificates will be issued
At least 90 days before any mortgage credit certificate is to be issued after a qualified mortgage credit certificate program, the issuing authority shall provide reasonable public notice of—
(A) the eligibility requirements for such certificate,
(B) the methods by which such certificates are to be issued, and
(C) such other information as the Secretary may require.
(6) Interest paid or accrued to related persons
No credit shall be allowed under subsection (a) for any interest paid or accrued to a person who is a related person to the taxpayer (within the meaning of section 144(a)(3)(A)).
(7) Principal residence
The term "principal residence" has the same meaning as when used in section 121.
(8) Qualified rehabilitation and home improvement
(A) Qualified rehabilitation
The term "qualified rehabilitation" has the meaning given such term by section 143(k)(5)(B).
(B) Qualified home improvement
The term "qualified home improvement" means an alteration, repair, or improvement described in section 143(k)(4).
(9) Qualified mortgage bond
The term "qualified mortgage bond" has the meaning given such term by section 143(a)(1).
(10) Manufactured housing
For purposes of this section, the term "single family residence" includes any manufactured home which has a minimum of 400 square feet of living space and a minimum width in excess of 102 inches and which is of a kind customarily used at a fixed location. Nothing in the preceding sentence shall be construed as providing that such a home will be taken into account in making determinations under section 143.
(f) Reduction in aggregate amount of qualified mortgage bonds which may be issued where certain requirements not met
(1) In general
If for any calendar year any mortgage credit certificate program which satisfies procedural requirements with respect to volume limitations prescribed by the Secretary fails to meet the requirements of paragraph (2) of subsection (d), such requirements shall be treated as satisfied with respect to any certified indebtedness of such program, but the applicable State ceiling under subsection (d) of section 146 for the State in which such program operates shall be reduced by 1.25 times the correction amount with respect to such failure. Such reduction shall be applied to such State ceiling for the calendar year following the calendar year in which the Secretary determines the correction amount with respect to such failure.
(2) Correction amount
(A) In general
For purposes of paragraph (1), the term "correction amount" means an amount equal to the excess credit amount divided by 0.25.
(B) Excess credit amount
(i) In general
For purposes of subparagraph (A)(ii), the term "excess credit amount" means the excess of—
(I) the credit amount for any mortgage credit certificate program, over
(II) the amount which would have been the credit amount for such program had such program met the requirements of paragraph (2) of subsection (d).
(ii) Credit amount
For purposes of clause (i), the term "credit amount" means the sum of the products determined under clauses (i) and (ii) of subsection (d)(2)(A).
(3) Special rule for States having constitutional home rule cities
In the case of a State having one or more constitutional home rule cities (within the meaning of section 146(d)(3)(C)), the reduction in the State ceiling by reason of paragraph (1) shall be allocated to the constitutional home rule city, or to the portion of the State not within such city, whichever caused the reduction.
(4) Exception where certification program
The provisions of this subsection shall not apply in any case in which there is a certification program which is designed to ensure that the requirements of this section are met and which meets such requirements as the Secretary may by regulations prescribe.
(5) Waiver
The Secretary may waive the application of paragraph (1) in any case in which he determines that the failure is due to reasonable cause.
(g) Reporting requirements
Each person who makes a loan which is a certified indebtedness amount under any mortgage credit certificate shall file a report with the Secretary containing—
(1) the name, address, and social security account number of the individual to which the certificate was issued,
(2) the certificate's issuer, date of issue, certified indebtedness amount, and certificate credit rate, and
(3) such other information as the Secretary may require by regulations.
Each person who issues a mortgage credit certificate shall file a report showing such information as the Secretary shall by regulations prescribe. Any such report shall be filed at such time and in such manner as the Secretary may require by regulations.
(h) Regulations; contracts
(1) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations which may require recipients of mortgage credit certificates to pay a reasonable processing fee to defray the expenses incurred in administering the program.
(2) Contracts
The Secretary is authorized to enter into contracts with any person to provide services in connection with the administration of this section.
(i) Recapture of portion of Federal subsidy from use of mortgage credit certificates
For provisions increasing the tax imposed by this chapter to recapture a portion of the Federal subsidy from the use of mortgage credit certificates, see section 143(m).
(Added
Prior Provisions
A prior section 25 was renumbered
Amendments
1998—Subsec. (e)(1)(C).
1997—Subsec. (e)(7).
1996—Subsec. (e)(1)(C).
1993—Subsecs. (h) to (j).
1991—Subsec. (h).
1990—Subsec. (h).
1989—Subsec. (h).
1988—Subsec. (c)(2)(A)(ii).
Subsec. (h).
Subsec. (j).
1986—Subsec. (a)(1)(B).
Subsec. (b)(2)(A)(ii).
Subsec. (b)(2)(A)(iii).
Subsec. (c)(2)(A).
Subsec. (c)(2)(A)(ii).
Subsec. (c)(2)(A)(iii).
"(I) subsection (d) (relating to residence requirements),
"(II) subsection (e) (relating to 3-year requirement),
"(III) subsection (f) (relating to purchase price requirement),
"(IV) subsection (h) (relating to portion of loans required to be placed in targeted areas), and
"(V) subsection (j), other than paragraph (2) thereof (relating to other requirements),".
Subsec. (c)(2)(A)(iii)(V).
Subsec. (c)(2)(B).
"(iii) paragraph (1) of section 103A(e) shall be applied by substituting '100 percent' for '90 percent or more'.
Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 90-percent requirement of section 103A(e)(1) and the Secretary is satisfied that such requirement will be met under such plan."
Subsec. (d)(2)(A).
Subsec. (d)(3).
"(A) has a State ceiling (as defined in section 103A(g)(4)) for the year an election is made that exceeds 20 percent of the average annual aggregate principal amount of mortgages executed during the immediately preceding 3 calendar years for single family owner-occupied residences located within the jurisdiction of such State, or
"(B) issued qualified mortgage bonds in an aggregate amount less than $150,000,000 for calendar year 1983,
the certificate credit rate for any mortgage credit certificate shall not exceed 20 percent unless the issuing authority submits a plan to the Secretary to ensure that the weighted average of the certificate credit rates in such mortgage credit certificate program does not exceed 20 percent and the Secretary approves such plan."
Subsec. (e)(1)(B).
Subsec. (e)(2).
Subsec. (e)(6).
Subsec. (e)(8)(A).
Subsec. (e)(8)(B).
Subsec. (e)(9).
Subsec. (e)(10).
Subsec. (f)(1).
Subsec. (f)(2)(A).
Subsec. (f)(3).
Subsec. (f)(4).
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1993 Amendment
Section 13141(f)(2) of
Effective Date of 1991 Amendment
Section 108(c)(2) of
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1013(a)(25), (26) of
Amendment by section 4005(a)(2) of
Amendment by section 4005(g)(7) of
Effective Date of 1986 Amendment
Amendment by section 1301(f)(1) of
Amendment by section 1862(a)–(d)(1) of
Effective Date
Section 612(g) of
"(1)
"(2)
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Section Referred to in Other Sections
This section is referred to in
§25A. Hope and Lifetime Learning credits
(a) Allowance of credit
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the amount equal to the sum of—
(1) the Hope Scholarship Credit, plus
(2) the Lifetime Learning Credit.
(b) Hope Scholarship Credit
(1) Per student credit
In the case of any eligible student for whom an election is in effect under this section for any taxable year, the Hope Scholarship Credit is an amount equal to the sum of—
(A) 100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $1,000, plus
(B) 50 percent of such expenses so paid as exceeds $1,000 but does not exceed the applicable limit.
(2) Limitations applicable to Hope Scholarship Credit
(A) Credit allowed only for 2 taxable years
An election to have this section apply with respect to any eligible student for purposes of the Hope Scholarship Credit under subsection (a)(1) may not be made for any taxable year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 2 prior taxable years.
(B) Credit allowed for year only if individual is at least ½ time student for portion of year
The Hope Scholarship Credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an individual unless such individual is an eligible student for at least one academic period which begins during such year.
(C) Credit allowed only for first 2 years of postsecondary education
The Hope Scholarship Credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 2 years of postsecondary education at an eligible educational institution.
(D) Denial of credit if student convicted of a felony drug offense
The Hope Scholarship Credit under subsection (a)(1) shall not be allowed for qualified tuition and related expenses for the enrollment or attendance of a student for any academic period if such student has been convicted of a Federal or State felony offense consisting of the possession or distribution of a controlled substance before the end of the taxable year with or within which such period ends.
(3) Eligible student
For purposes of this subsection, the term "eligible student" means, with respect to any academic period, a student who—
(A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (
(B) is carrying at least ½ the normal full-time work load for the course of study the student is pursuing.
(4) Applicable limit
For purposes of paragraph (1)(B), the applicable limit for any taxable year is an amount equal to 2 times the dollar amount in effect under paragraph (1)(A) for such taxable year.
(c) Lifetime Learning Credit
(1) Per taxpayer credit
The Lifetime Learning Credit for any taxpayer for any taxable year is an amount equal to 20 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished during any academic period beginning in such taxable year) as does not exceed $10,000 ($5,000 in the case of taxable years beginning before January 1, 2003).
(2) Special rules for determining expenses
(A) Coordination with Hope Scholarship
The qualified tuition and related expenses with respect to an individual who is an eligible student for whom a Hope Scholarship Credit under subsection (a)(1) is allowed for the taxable year shall not be taken into account under this subsection.
(B) Expenses eligible for Lifetime Learning Credit
For purposes of paragraph (1), qualified tuition and related expenses shall include expenses described in subsection (f)(1) with respect to any course of instruction at an eligible educational institution to acquire or improve job skills of the individual.
(d) Limitation based on modified adjusted gross income
(1) In general
The amount which would (but for this subsection) be taken into account under subsection (a) for the taxable year shall be reduced (but not below zero) by the amount determined under paragraph (2).
(2) Amount of reduction
The amount determined under this paragraph is the amount which bears the same ratio to the amount which would be so taken into account as—
(A) the excess of—
(i) the taxpayer's modified adjusted gross income for such taxable year, over
(ii) $40,000 ($80,000 in the case of a joint return), bears to
(B) $10,000 ($20,000 in the case of a joint return).
(3) Modified adjusted gross income
The term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.
(e) Election to have section apply
(1) In general
No credit shall be allowed under subsection (a) for a taxable year with respect to the qualified tuition and related expenses of an individual unless the taxpayer elects to have this section apply with respect to such individual for such year.
(2) Coordination with exclusions
An election under this subsection shall not take effect with respect to an individual for any taxable year if any portion of any distribution during such taxable year from an education individual retirement account is excluded from gross income under section 530(d)(2).
(f) Definitions
For purposes of this section—
(1) Qualified tuition and related expenses
(A) In general
The term "qualified tuition and related expenses" means tuition and fees required for the enrollment or attendance of—
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151,
at an eligible educational institution for courses of instruction of such individual at such institution.
(B) Exception for education involving sports, etc.
Such term does not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part of the individual's degree program.
(C) Exception for nonacademic fees
Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction.
(2) Eligible educational institution
The term "eligible educational institution" means an institution—
(A) which is described in section 481 of the Higher Education Act of 1965 (
(B) which is eligible to participate in a program under title IV of such Act.
(g) Special rules
(1) Identification requirement
No credit shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual on the return of tax for the taxable year.
(2) Adjustment for certain scholarships, etc.
The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsections (b), (c), and (d)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as—
(A) a qualified scholarship which is excludable from gross income under section 117,
(B) an educational assistance allowance under
(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual's educational expenses, or attributable to such individual's enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States.
(3) Treatment of expenses paid by dependent
If a deduction under section 151 with respect to an individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins—
(A) no credit shall be allowed under subsection (a) to such individual for such individual's taxable year, and
(B) qualified tuition and related expenses paid by such individual during such individual's taxable year shall be treated for purposes of this section as paid by such other taxpayer.
(4) Treatment of certain prepayments
If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.
(5) Denial of double benefit
No credit shall be allowed under this section for any expense for which a deduction is allowed under any other provision of this chapter.
(6) No credit for married individuals filing separate returns
If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.
(7) Nonresident aliens
If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.
(h) Inflation adjustments
(1) Dollar limitation on amount of credit
(A) In general
In the case of a taxable year beginning after 2001, each of the $1,000 amounts under subsection (b)(1) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2000" for "calendar year 1992" in subparagraph (B) thereof.
(B) Rounding
If any amount as adjusted under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100.
(2) Income limits
(A) In general
In the case of a taxable year beginning after 2001, the $40,000 and $80,000 amounts in subsection (d)(2) shall each be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2000" for "calendar year 1992" in subparagraph (B) thereof.
(B) Rounding
If any amount as adjusted under subparagraph (A) is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.
(i) Regulations
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including regulations providing for a recapture of the credit allowed under this section in cases where there is a refund in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit.
(Added
References in Text
The date of the enactment of this section, referred to in subsecs. (b)(3)(A) and (f)(2)(A), is the date of enactment of
The Higher Education Act of 1965, referred to in subsec. (f)(2)(B), is
Effective Date
Section 201(f) of
"(1)
"(2)
Section Referred to in Other Sections
This section is referred to in
§26. Limitation based on tax liability; definition of tax liability
(a) Limitation based on amount of tax
(1) In general
The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the excess (if any) of—
(A) the taxpayer's regular tax liability for the taxable year, over
(B) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).
For purposes of subparagraph (B), the taxpayer's tentative minimum tax for any taxable year beginning during 1999 shall be treated as being zero.
(2) Special rule for 2000 and 2001
For purposes of any taxable year beginning during 2000 or 2001, the aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—
(A) the taxpayer's regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27(a), and
(B) the tax imposed by section 55(a) for the taxable year.
(b) Regular tax liability
For purposes of this part—
(1) In general
The term "regular tax liability" means the tax imposed by this chapter for the taxable year.
(2) Exception for certain taxes
For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:
(A) section 55 (relating to minimum tax),
(B) section 59A (relating to environmental tax),
(C) subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),
(D) section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),
(E) section 530(d)(3) (relating to additional tax on certain distributions from education individual retirement accounts),
(F) section 531 (relating to accumulated earnings tax),
(G) section 541 (relating to personal holding company tax),
(H) section 1351(d)(1) (relating to recoveries of foreign expropriation losses),
(I) section 1374 (relating to tax on certain built-in gains of S corporations),
(J) section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),
(K) subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),
(L) sections 871(a) and 881 (relating to certain income of nonresident aliens and foreign corporations),
(M) section 860E(e) (relating to taxes with respect to certain residual interests),
(N) section 884 (relating to branch profits tax),
(O) sections 453(l)(3) and 453A(c) (relating to interest on certain deferred tax liabilities),
(P) section 860K (relating to treatment of transfers of high-yield interests to disqualified holders), and
(Q) section 220(f)(4) (relating to additional tax on medical savings account distributions not used for qualified medical expenses).
(c) Tentative minimum tax
For purposes of this part, the term "tentative minimum tax" means the amount determined under section 55(b)(1).
(Added §25, renumbered §26,
Amendments
1999—Subsec. (a).
"(1) the taxpayer's regular tax liability for the taxable year, over
"(2) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).
For purposes of paragraph (2), the taxpayer's tentative minimum tax for any taxable year beginning during 1998 shall be treated as being zero."
1998—Subsec. (a).
1997—Subsec. (b)(2)(E) to (O).
Subsec. (b)(2)(P).
Subsec. (b)(2)(Q).
1996—Subsec. (b)(2)(O).
1989—Subsec. (b)(2)(C), (D).
"(C) subsection (m)(5)(B) (q), or (v) of section 72 (relating to additional tax on certain distributions),
"(D) section 72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans),".
Subsec. (b)(2)(K).
Subsec. (b)(2)(L), (M).
"(L) section 860E(e) (relating to taxes with respect to certain residual interests), and
"(L) section 884 (relating to branch profits tax), and
"(M) section 143(m) (relating to recapture of portion of federal subsidy from use of mortgage bonds and mortgage credit certificates)."
Subsec. (b)(2)(N).
1988—Subsec. (b)(2)(C).
Subsec. (b)(2)(D).
Subsec. (b)(2)(K).
Subsec. (b)(2)(L).
Subsec. (b)(2)(M).
1986—Subsec. (a).
Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c).
Effective Date of 1999 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Section 213(f) of
Section 1602(i) of
Effective Date of 1996 Amendment
Section 1621(d) of
Effective Date of 1989 Amendment
Amendment by section 7811(c)(1), (2) of
Section 7823 of
Effective Date of 1988 Amendment
Amendment by section 1006(t)(16)(C) of
Amendment by sections 1007(g)(1), 1011A(c)(10), and 1012(q)(8) of
Amendment by section 4005(g)(4) of
Amendment by section 5012(b)(2) of
Effective Date of 1986 Amendments
Amendment by section 261(c) of
Amendment by section 632(c)(1) of
Amendment by section 632(c)(1) of
Amendment by section 701(c)(1) of
Section 516(c) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(c)(1) of
Treatment of Tax Imposed Under Former Section 409(c)
Section 491(f)(5) of
Section Referred to in Other Sections
This section is referred to in