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Www irs gov eo 10. Www irs gov eo   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. Www irs gov eo Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Www irs gov eo Use Schedule SE to figure net earnings from self-employment. Www irs gov eo Sole proprietor or independent contractor. Www irs gov eo   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. Www irs gov eo SE tax rate. Www irs gov eo    For 2013, the SE tax rate on net earnings is 15. Www irs gov eo 3% (12. Www irs gov eo 4% social security tax plus 2. Www irs gov eo 9% Medicare tax). Www irs gov eo Maximum earnings subject to self-employment tax. Www irs gov eo    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. Www irs gov eo 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. Www irs gov eo   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. Www irs gov eo 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. Www irs gov eo   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. Www irs gov eo 4% social security part of the SE tax on any of your net earnings. Www irs gov eo However, you must pay the 2. Www irs gov eo 9% Medicare part of the SE tax on all your net earnings. Www irs gov eo Special Rules and Exceptions Aliens. Www irs gov eo   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Www irs gov eo S. Www irs gov eo citizens. Www irs gov eo Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. Www irs gov eo S. Www irs gov eo social security system. Www irs gov eo However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. Www irs gov eo S. Www irs gov eo residents for self-employment tax purposes. Www irs gov eo For more information on aliens, see Publication 519, U. Www irs gov eo S. Www irs gov eo Tax Guide for Aliens. Www irs gov eo Child employed by parent. Www irs gov eo   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. Www irs gov eo Church employee. Www irs gov eo    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. Www irs gov eo 28 or more in wages from the church or organization. Www irs gov eo For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Www irs gov eo Fishing crew member. Www irs gov eo   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. Www irs gov eo You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. Www irs gov eo The pay is not more than $100 per trip. Www irs gov eo The pay is received only if there is a minimum catch. Www irs gov eo The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. Www irs gov eo You get a share of the catch or a share of the proceeds from the sale of the catch. Www irs gov eo Your share depends on the amount of the catch. Www irs gov eo The boat's operating crew normally numbers fewer than 10 individuals. Www irs gov eo (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. Www irs gov eo ) Notary public. Www irs gov eo   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). Www irs gov eo State or local government employee. Www irs gov eo   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. Www irs gov eo Foreign government or international organization employee. Www irs gov eo   You are subject to SE tax if both the following conditions are true. Www irs gov eo You are a U. Www irs gov eo S. Www irs gov eo citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. Www irs gov eo Your employer is not required to withhold social security and Medicare taxes from your wages. Www irs gov eo U. Www irs gov eo S. Www irs gov eo citizen or resident alien residing abroad. Www irs gov eo    If you are a self-employed U. Www irs gov eo S. Www irs gov eo citizen or resident alien living outside the United States, in most cases you must pay SE tax. Www irs gov eo Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. Www irs gov eo Exception. Www irs gov eo    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. Www irs gov eo Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. Www irs gov eo The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. Www irs gov eo   For more information, see the Instructions for Schedule SE (Form 1040). Www irs gov eo More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. Www irs gov eo A loss from one business reduces your profit from another business. Www irs gov eo Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. Www irs gov eo Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Www irs gov eo It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. Www irs gov eo Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. Www irs gov eo If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. Www irs gov eo Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Www irs gov eo The regular method. Www irs gov eo The nonfarm optional method. Www irs gov eo The farm optional method. Www irs gov eo You must use the regular method unless you are eligible to use one or both of the optional methods. Www irs gov eo Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. Www irs gov eo You want to receive credit for social security benefit coverage. Www irs gov eo You incurred child or dependent care expenses for which you could claim a credit. Www irs gov eo (An optional method may increase your earned income, which could increase your credit. Www irs gov eo ) You are entitled to the earned income credit. Www irs gov eo (An optional method may increase your earned income, which could increase your credit. Www irs gov eo ) You are entitled to the additional child tax credit. Www irs gov eo (An optional method may increase your earned income, which could increase your credit. Www irs gov eo ) Effects of using an optional method. Www irs gov eo   Using an optional method could increase your SE tax. Www irs gov eo Paying more SE tax could result in your getting higher benefits when you retire. Www irs gov eo   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. Www irs gov eo   The optional methods may be used only to figure your SE tax. Www irs gov eo To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. Www irs gov eo Regular Method Multiply your total earnings subject to SE tax by 92. Www irs gov eo 35% (. Www irs gov eo 9235) to get your net earnings under the regular method. Www irs gov eo See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Www irs gov eo Net earnings figured using the regular method are also called actual net earnings. Www irs gov eo Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. Www irs gov eo You may use this method if you meet all the following tests. Www irs gov eo You are self-employed on a regular basis. Www irs gov eo This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Www irs gov eo The net earnings can be from either farm or nonfarm earnings or both. Www irs gov eo You have used this method less than 5 years. Www irs gov eo (There is a 5-year lifetime limit. Www irs gov eo ) The years do not have to be one after another. Www irs gov eo Your net nonfarm profits were: Less than $5,024, and Less than 72. Www irs gov eo 189% of your gross nonfarm income. Www irs gov eo Net nonfarm profits. Www irs gov eo   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). Www irs gov eo   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. Www irs gov eo Gross nonfarm income. Www irs gov eo   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). Www irs gov eo Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. Www irs gov eo Table 10-1. Www irs gov eo Figuring Nonfarm Net Earnings IF your gross nonfarm income is. Www irs gov eo . Www irs gov eo . Www irs gov eo THEN your net earnings are equal to. Www irs gov eo . Www irs gov eo . Www irs gov eo $6,960 or less Two-thirds of your gross nonfarm income. Www irs gov eo More than $6,960 $4,640 Actual net earnings. Www irs gov eo   Your actual net earnings are 92. Www irs gov eo 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. Www irs gov eo 35% (. Www irs gov eo 9235) to get actual net earnings). Www irs gov eo Actual net earnings are equivalent to net earnings figured using the regular method. Www irs gov eo Optional net earnings less than actual net earnings. Www irs gov eo   You cannot use this method to report an amount less than your actual net earnings from self-employment. Www irs gov eo Gross nonfarm income of $6,960 or less. Www irs gov eo   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. Www irs gov eo Example 1. Www irs gov eo Net nonfarm profit less than $5,024 and less than 72. Www irs gov eo 189% of gross nonfarm income. Www irs gov eo Ann Green runs a craft business. Www irs gov eo Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. Www irs gov eo She meets the test for being self-employed on a regular basis. Www irs gov eo She has used the nonfarm optional method less than 5 years. Www irs gov eo Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . Www irs gov eo 9235). Www irs gov eo Because her net profit is less than $5,024 and less than 72. Www irs gov eo 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). Www irs gov eo Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. Www irs gov eo Example 2. Www irs gov eo Net nonfarm profit less than $5,024 but not less than 72. Www irs gov eo 189% of gross nonfarm income. Www irs gov eo Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. Www irs gov eo She must use the regular method to figure her net earnings. Www irs gov eo She cannot use the nonfarm optional method because her net profit is not less than 72. Www irs gov eo 189% of her gross income. Www irs gov eo Example 3. Www irs gov eo Net loss from a nonfarm business. Www irs gov eo Assume that in Example 1 Ann has a net loss of $700. Www irs gov eo She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. Www irs gov eo Example 4. Www irs gov eo Nonfarm net earnings less than $400. Www irs gov eo Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. Www irs gov eo In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. Www irs gov eo Gross nonfarm income of more than $6,960. Www irs gov eo   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. Www irs gov eo Example 1. Www irs gov eo Net nonfarm profit less than $5,024 and less than 72. Www irs gov eo 189% of gross nonfarm income. Www irs gov eo John White runs an appliance repair shop. Www irs gov eo His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. Www irs gov eo He meets the test for being self-employed on a regular basis. Www irs gov eo He has used the nonfarm optional method less than 5 years. Www irs gov eo His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . Www irs gov eo 9235). Www irs gov eo Because his net profit is less than $5,024 and less than 72. Www irs gov eo 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. Www irs gov eo Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. Www irs gov eo Example 2. Www irs gov eo Net nonfarm profit not less than $5,024. Www irs gov eo Assume that in Example 1 John's net profit is $5,400. Www irs gov eo He must use the regular method. Www irs gov eo He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. Www irs gov eo Example 3. Www irs gov eo Net loss from a nonfarm business. Www irs gov eo Assume that in Example 1 John has a net loss of $700. Www irs gov eo He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. Www irs gov eo Farm Optional Method Use the farm optional method only for earnings from a farming business. Www irs gov eo See Publication 225 for information about this method. Www irs gov eo Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. Www irs gov eo To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. Www irs gov eo Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. Www irs gov eo Add the net earnings figured under each method to arrive at your total net earnings from self-employment. Www irs gov eo You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Www irs gov eo If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Www irs gov eo Example. Www irs gov eo You are a self-employed farmer. Www irs gov eo You also operate a retail grocery store. Www irs gov eo Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. Www irs gov eo Table 10-2. Www irs gov eo Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. Www irs gov eo Method 1. Www irs gov eo Using the regular method for both farm and nonfarm income. Www irs gov eo Method 2. Www irs gov eo Using the optional method for farm income and the regular method for nonfarm income. Www irs gov eo Method 3. Www irs gov eo Using the regular method for farm income and the optional method for nonfarm income. Www irs gov eo Method 4. Www irs gov eo Using the optional method for both farm and nonfarm income. Www irs gov eo Note. Www irs gov eo Actual net earnings is the same as net earnings figured using the regular method. Www irs gov eo Table 10-3. Www irs gov eo Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. Www irs gov eo Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. Www irs gov eo Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. Www irs gov eo Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Www irs gov eo Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Www irs gov eo Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. Www irs gov eo However, certain taxpayers must use Section B—Long Schedule SE. Www irs gov eo If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. Www irs gov eo Joint return. Www irs gov eo   Even if you file a joint return, you cannot file a joint Schedule SE. Www irs gov eo This is true whether one spouse or both spouses have earnings subject to SE tax. Www irs gov eo If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. Www irs gov eo However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. Www irs gov eo Attach both schedules to the joint return. Www irs gov eo More than one business. Www irs gov eo   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. Www irs gov eo A loss from one business will reduce your profit from another business. Www irs gov eo File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. Www irs gov eo Example. Www irs gov eo You are the sole proprietor of two separate businesses. Www irs gov eo You operate a restaurant that made a net profit of $25,000. Www irs gov eo You also have a cabinetmaking business that had a net loss of $500. Www irs gov eo You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. Www irs gov eo You file Schedule SE showing total earnings subject to SE tax of $24,500. Www irs gov eo Prev  Up  Next   Home   More Online Publications
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Www irs gov eo 37. Www irs gov eo   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption 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 Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Www irs gov eo  The maximum adoption credit is $12,970 for 2013. Www irs gov eo See Adoption Credit . Www irs gov eo Plug-in electric vehicle credit. Www irs gov eo  This credit has expired. Www irs gov eo Credit for prior year minimum tax. Www irs gov eo  The refundable portion of the credit for prior year minimum tax has expired. Www irs gov eo Excess withholding of social security and railroad retirement tax. Www irs gov eo  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Www irs gov eo 2% of wages up to $113,700. Www irs gov eo If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Www irs gov eo See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Www irs gov eo Introduction This chapter discusses the following nonrefundable credits. Www irs gov eo Adoption credit. Www irs gov eo Alternative motor vehicle credit. Www irs gov eo Alternative fuel vehicle refueling property credit. Www irs gov eo Credit to holders of tax credit bonds. Www irs gov eo Foreign tax credit. Www irs gov eo Mortgage interest credit. Www irs gov eo Nonrefundable credit for prior year minimum tax. Www irs gov eo Plug-in electric drive motor vehicle credit. Www irs gov eo Residential energy credits. Www irs gov eo Retirement savings contributions credit. Www irs gov eo This chapter also discusses the following refundable credits. Www irs gov eo Credit for tax on undistributed capital gain. Www irs gov eo Health coverage tax credit. Www irs gov eo Credit for excess social security tax or railroad retirement tax withheld. Www irs gov eo Several other credits are discussed in other chapters in this publication. Www irs gov eo Child and dependent care credit (chapter 32). Www irs gov eo Credit for the elderly or the disabled (chapter 33). Www irs gov eo Child tax credit (chapter 34). Www irs gov eo Education credits (chapter 35). Www irs gov eo Earned income credit (chapter 36). Www irs gov eo Nonrefundable credits. Www irs gov eo   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Www irs gov eo These credits may reduce your tax to zero. Www irs gov eo If these credits are more than your tax, the excess is not refunded to you. Www irs gov eo Refundable credits. Www irs gov eo   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Www irs gov eo These credits are added to the federal income tax withheld and any estimated tax payments you made. Www irs gov eo If this total is more than your total tax, the excess will be refunded to you. Www irs gov eo 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 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 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. Www irs gov eo However, if the total of these credits is more than your tax, the excess is not refunded to you. Www irs gov eo Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Www irs gov eo The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Www irs gov eo If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Www irs gov eo If your modified AGI is $234,580 or more, you cannot take the credit. Www irs gov eo Qualified adoption expenses. Www irs gov eo   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Www irs gov eo 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. Www irs gov eo Nonqualified expenses. Www irs gov eo   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. Www irs gov eo Eligible child. Www irs gov eo   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Www irs gov eo Child with special needs. Www irs gov eo   An eligible child is a child with special needs if all three of the following apply. Www irs gov eo The child was a citizen or resident of the United States (including U. Www irs gov eo S. Www irs gov eo possessions) at the time the adoption process began. Www irs gov eo A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Www irs gov eo The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Www irs gov eo Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Www irs gov eo When to take the credit. Www irs gov eo   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Www irs gov eo If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Www irs gov eo See the Instructions for Form 8839 for more specific information on when to take the credit. Www irs gov eo Foreign child. Www irs gov eo   If the child is not a U. Www irs gov eo S. Www irs gov eo citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Www irs gov eo 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. Www irs gov eo How to take the credit. Www irs gov eo   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Www irs gov eo Include the credit in your total for Form 1040, line 53. Www irs gov eo Check box c and enter “8839” on the line next to that box. Www irs gov eo More information. Www irs gov eo   For more information, see the Instructions for Form 8839. Www irs gov eo Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Www irs gov eo Amount of credit. Www irs gov eo   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Www irs gov eo In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Www irs gov eo   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Www irs gov eo How to take the credit. Www irs gov eo   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Www irs gov eo Include the credit in your total for Form 1040, line 53. Www irs gov eo Check box c and enter “8910” on the line next to that box. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see the Instructions for Form 8910. Www irs gov eo 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 2013. Www irs gov eo Qualified alternative fuel vehicle refueling property. Www irs gov eo   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Www irs gov eo 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. Www irs gov eo To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Www irs gov eo   The following are alternative fuels. Www irs gov eo 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. Www irs gov eo 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. Www irs gov eo Electricity. Www irs gov eo Amount of the credit. Www irs gov eo   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Www irs gov eo For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Www irs gov eo How to take the credit. Www irs gov eo   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Www irs gov eo Include the credit in your total for Form 1040, line 53. Www irs gov eo Check box c and enter “8911” on the line next to that box. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see the Form 8911 instructions. Www irs gov eo 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. Www irs gov eo You may be able to take a credit if you are a holder of one of the following bonds. Www irs gov eo Clean renewable energy bonds (issued before 2010). Www irs gov eo New clean renewable energy bonds. Www irs gov eo Qualified energy conservation bonds. Www irs gov eo Qualified school construction bonds. Www irs gov eo Qualified zone academy bonds. Www irs gov eo Build America bonds. Www irs gov eo In some instances, an issuer may elect to receive a credit for interest paid on the bond. Www irs gov eo If the issuer makes this election, you cannot also claim a credit. Www irs gov eo Interest income. Www irs gov eo   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Www irs gov eo How to take the credit. Www irs gov eo   Complete Form 8912 and attach it to your Form 1040. Www irs gov eo Include the credit in your total for Form 1040, line 53. Www irs gov eo Check box c and enter “8912” on the line next to that box. Www irs gov eo More information. Www irs gov eo   For more information, see the Instructions for Form 8912. Www irs gov eo Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Www irs gov eo S. Www irs gov eo possession as a credit against your U. Www irs gov eo S. Www irs gov eo income tax. Www irs gov eo Or, you can deduct them as an itemized deduction (see chapter 22). Www irs gov eo You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Www irs gov eo S. Www irs gov eo tax under any of the following. Www irs gov eo Foreign earned income exclusion. Www irs gov eo Foreign housing exclusion. Www irs gov eo Income from Puerto Rico exempt from U. Www irs gov eo S. Www irs gov eo tax. Www irs gov eo Possession exclusion. Www irs gov eo Limit on the credit. Www irs gov eo   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Www irs gov eo S. Www irs gov eo tax liability (Form 1040, line 44), multiplied by a fraction. Www irs gov eo The numerator of the fraction is your taxable income from sources outside the United States. Www irs gov eo The denominator is your total taxable income from U. Www irs gov eo S. Www irs gov eo and foreign sources. Www irs gov eo See Publication 514 for more information. Www irs gov eo How to take the credit. Www irs gov eo   Complete Form 1116 and attach it to your Form 1040. Www irs gov eo Enter the credit on Form 1040, line 47. Www irs gov eo Exception. Www irs gov eo   You do not have to complete Form 1116 to take the credit if all of the following apply. Www irs gov eo 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). Www irs gov eo If you had dividend income from shares of stock, you held those shares for at least 16 days. Www irs gov eo You are not filing Form 4563 or excluding income from sources within Puerto Rico. Www irs gov eo The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Www irs gov eo All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Www irs gov eo More information. Www irs gov eo   For more information on the credit and these requirements, see the Instructions for Form 1116. Www irs gov eo Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Www irs gov eo If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Www irs gov eo Who qualifies. Www irs gov eo   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Www irs gov eo Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Www irs gov eo Amount of credit. Www irs gov eo   Figure your credit on Form 8396. Www irs gov eo 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. Www irs gov eo   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. Www irs gov eo 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. Www irs gov eo      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Www irs gov eo   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Www irs gov eo 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. Www irs gov eo See Publication 530 for more information. Www irs gov eo Carryforward. Www irs gov eo   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. Www irs gov eo 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. Www irs gov eo   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). Www irs gov eo How to take the credit. Www irs gov eo    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Www irs gov eo Be sure to include any credit carryforward from 2010, 2011, and 2012. Www irs gov eo   Include the credit in your total for Form 1040, line 53. Www irs gov eo Check box c and enter “8396” on the line next to that box. Www irs gov eo Reduced home mortgage interest deduction. Www irs gov eo   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. Www irs gov eo You must do this even if part of that amount is to be carried forward to 2014. Www irs gov eo For more information about the home mortgage interest deduction, see chapter 23. Www irs gov eo Recapture of federal mortgage subsidy. Www irs gov eo   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. Www irs gov eo 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. Www irs gov eo See the Instructions for Form 8828 and chapter 15 for more information. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see the Form 8396 instructions. Www irs gov eo 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. Www irs gov eo 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. Www irs gov eo This is called the alternative minimum tax. Www irs gov eo The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Www irs gov eo 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. Www irs gov eo You may be able to take a credit against your regular tax if for 2012 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 2013, or An unallowed qualified electric vehicle credit. Www irs gov eo How to take the credit. Www irs gov eo    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Www irs gov eo Include the credit in your total for Form 1040, line 53, and check box b. Www irs gov eo You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see the Instructions for Form 8801. Www irs gov eo 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 2013 and you meet some other requirements. Www irs gov eo Qualified plug-in electric drive motor vehicle. Www irs gov eo   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. Www irs gov eo Qualified two- or three-wheeled plug-in electric vehicle. Www irs gov eo   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. Www irs gov eo 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. Www irs gov eo Certification and other requirements. Www irs gov eo   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS 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. Www irs gov eo 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. Www irs gov eo   The following requirements must also be met to qualify for the credit. Www irs gov eo You are the owner of the vehicle. Www irs gov eo If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Www irs gov eo You placed the vehicle in service during 2013. Www irs gov eo The vehicle is manufactured primarily for use on public streets, roads, and highways. Www irs gov eo The original use of the vehicle began with you. Www irs gov eo You acquired the vehicle for your use or to lease to others, and not for resale. Www irs gov eo In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Www irs gov eo You use the vehicle primarily in the United States. Www irs gov eo How to take the credit. Www irs gov eo   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Www irs gov eo Include the credit in your total for Form 1040, line 53. Www irs gov eo Check box c and enter “8936” on the line next to that box. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see the Form 8936 instructions. Www irs gov eo 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 2013. Www irs gov eo Nonbusiness energy property credit. Www irs gov eo Residential energy efficient property credit. Www irs gov eo 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. Www irs gov eo Nonbusiness energy property credit. Www irs gov eo   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 2013, and Any residential energy property costs paid or incurred in 2013. Www irs gov eo   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. Www irs gov eo    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 2013. Www irs gov eo   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. Www irs gov eo Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Www irs gov eo Exterior window (including skylights). Www irs gov eo Exterior doors. Www irs gov eo Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Www irs gov eo   Residential energy property is any of the following. Www irs gov eo 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. Www irs gov eo Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Www irs gov eo Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Www irs gov eo Residential energy efficient property credit. Www irs gov eo   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. Www irs gov eo 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. Www irs gov eo Basis reduction. Www irs gov eo   You must reduce the basis of your home by the amount of any credit allowed. Www irs gov eo How to take the credit. Www irs gov eo   Complete Form 5695 and attach it to your Form 1040. Www irs gov eo Enter the credit on Form 1040, line 52. Www irs gov eo More information. Www irs gov eo   For more information on these credits, see the Form 5695 instructions. Www irs gov eo 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. Www irs gov eo However, you cannot take the credit if either of the following applies. Www irs gov eo The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Www irs gov eo The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Www irs gov eo Student. Www irs gov eo   You were a student if during any part of 5 calendar months of 2013 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. Www irs gov eo School. Www irs gov eo   A school includes a technical, trade, or mechanical school. Www irs gov eo It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Www irs gov eo How to take the credit. Www irs gov eo   Figure the credit on Form 8880. Www irs gov eo Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see the Form 8880 instructions. Www irs gov eo Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Www irs gov eo 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. Www irs gov eo 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. Www irs gov eo 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. Www irs gov eo The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Www irs gov eo How to take the credit. Www irs gov eo   To take the credit, attach Copy B of Form 2439 to your Form 1040. Www irs gov eo Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Www irs gov eo More information. Www irs gov eo   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Www irs gov eo 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. Www irs gov eo 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. Www irs gov eo 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. Www irs gov eo S. Www irs gov eo Treasury–HCTC. Www irs gov eo ” 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. Www irs gov eo You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Www irs gov eo You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Www irs gov eo S. Www irs gov eo military health system (TRICARE). Www irs gov eo You were not imprisoned under federal, state, or local authority. Www irs gov eo Your employer did not pay 50% or more of the cost of coverage. Www irs gov eo You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Www irs gov eo But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Www irs gov eo If you meet all of these conditions, you may be able to take a credit of up to 72. Www irs gov eo 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Www irs gov eo You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Www irs gov eo 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. Www irs gov eo You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Www irs gov eo 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. Www irs gov eo TAA recipient. Www irs gov eo   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). Www irs gov eo Example. Www irs gov eo You received a trade adjustment allowance for January 2013. Www irs gov eo You were an eligible TAA recipient on the first day of January and February. Www irs gov eo Alternative TAA recipient. Www irs gov eo   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. Www irs gov eo Example. Www irs gov eo You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Www irs gov eo The program was established by the Department of Labor. Www irs gov eo You were an eligible alternative TAA recipient on the first day of October and November. Www irs gov eo RTAA recipient. Www irs gov eo   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. Www irs gov eo PBGC pension recipient. Www irs gov eo   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Www irs gov eo You were age 55 or older on the first day of the month. Www irs gov eo You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Www irs gov eo 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. Www irs gov eo How to take the credit. Www irs gov eo   To take the credit, complete Form 8885 and attach it to your Form 1040. Www irs gov eo Include your credit in the total for Form 1040, line 71, and check box c. Www irs gov eo   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Www irs gov eo For details, see Publication 502 or Form 8885. Www irs gov eo More information. Www irs gov eo   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. Www irs gov eo Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Www irs gov eo If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Www irs gov eo If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Www irs gov eo If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Www irs gov eo 2% rate. Www irs gov eo You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Www irs gov eo For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Www irs gov eo 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Www irs gov eo 45%) or the Additional Medicare Tax rate (. Www irs gov eo 9%). Www irs gov eo The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Www irs gov eo Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Www irs gov eo 40 RRTA tier 2 $84,300 $3,709. Www irs gov eo 20 All wages are subject to Medicare tax withholding. Www irs gov eo   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Www irs gov eo Be sure to attach a copy of all of your W-2 forms. Www irs gov eo Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Www irs gov eo Employer's error. Www irs gov eo   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. Www irs gov eo The employer should adjust the tax for you. Www irs gov eo If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Www irs gov eo Joint return. Www irs gov eo   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. Www irs gov eo Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Www irs gov eo How to figure the credit if you did not work for a railroad. Www irs gov eo   If you did not work for a railroad during 2013, figure the credit as follows: 1. Www irs gov eo Add all social security tax withheld (but not more than $7,049. Www irs gov eo 40 for each employer). Www irs gov eo Enter the total here   2. Www irs gov eo 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. Www irs gov eo Add lines 1 and 2. Www irs gov eo If $7,049. Www irs gov eo 40 or less, stop here. Www irs gov eo You cannot take  the credit   4. Www irs gov eo Social security tax limit 7,049. Www irs gov eo 40 5. Www irs gov eo Credit. Www irs gov eo Subtract line 4 from line 3. Www irs gov eo Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Www irs gov eo You are married and file a joint return with your spouse who had no gross income in 2013. Www irs gov eo During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Www irs gov eo Social security tax of $3,720 was withheld. Www irs gov eo You also worked for another employer in 2013 and earned $55,000 in wages. Www irs gov eo $3,410 of social security tax was withheld from these wages. Www irs gov eo Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Www irs gov eo 60 for the excess social security tax withheld. Www irs gov eo 1. Www irs gov eo Add all social security tax withheld (but not more than $7,049. Www irs gov eo 40 for each employer). Www irs gov eo Enter the total here $7,130. Www irs gov eo 00 2. Www irs gov eo 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. Www irs gov eo Add lines 1 and 2. Www irs gov eo If $7,049. Www irs gov eo 40 or less, stop here. Www irs gov eo You cannot take the credit 7,130. Www irs gov eo 00 4. Www irs gov eo Social security tax limit 7,049. Www irs gov eo 40 5. Www irs gov eo Credit. Www irs gov eo Subtract line 4 from line 3. Www irs gov eo Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Www irs gov eo 60 How to figure the credit if you worked for a railroad. Www irs gov eo   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Www irs gov eo Add all social security and tier 1 RRTA tax withheld at the 6. Www irs gov eo 2% rate (but not more than $7,049. Www irs gov eo 40 for each employer). Www irs gov eo Enter the total here   2. Www irs gov eo 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. Www irs gov eo Add lines 1 and 2. Www irs gov eo If $7,049. Www irs gov eo 40 or less, stop here. Www irs gov eo You cannot take  the credit   4. Www irs gov eo Social security and tier 1 RRTA  tax limit 7,049. Www irs gov eo 40 5. Www irs gov eo Credit. Www irs gov eo Subtract line 4 from line 3. Www irs gov eo Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Www irs gov eo   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Www irs gov eo More information. Www irs gov eo   For more information on the credit, see Publication 505. Www irs gov eo Prev  Up  Next   Home   More Online Publications