Plug-in electric drive motor vehicle credit. This credit is not available for electric motorcycles and three-wheeled vehicles placed in service after December 31, 2013.

You may want to see:

• 502 Medical and Dental Expenses
  
• 514 Foreign Tax Credit for Individuals
  
• 530 Tax Information for Homeowners
  
• 590 Individual Retirement Arrangements (IRAs)

The credits discussed in this part of the chapter can reduce your tax. However, if the total of these credits is more than your tax, the excess is not refunded to you.

You may be able to take a tax credit of up to $13,190 for qualified expenses paid to adopt an eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses.

If your modified adjusted gross income (AGI) is more than $197,880, your credit is reduced. If your modified AGI is $237,880 or more, you cannot take the credit.

Qualified adoption expenses. Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. These expenses include:

• Adoption fees,
  
• Court costs,
  
• Attorney fees,
  
• Travel expenses (including amounts spent for meals and lodging) while away from home, and
  
• Re-adoption expenses to adopt a foreign child.

Nonqualified expenses. Qualified adoption expenses do not include expenses:

• That violate state or federal law,
  
• For carrying out any surrogate parenting arrangement,
  
• For the adoption of your spouse’s child,
  
• For which you received funds under any federal, state, or local program,
  
• Allowed as a credit or deduction under any other federal income tax rule, or
  
• Paid or reimbursed by your employer or any other person or organization.

Eligible child. The term “eligible child” means any individual:

• Under 18 years old, or
  
• Physically or mentally incapable of caring for himself or herself.

Child with special needs. An eligible child is a child with special needs if all three of the following apply.

1. The child was a citizen or resident of the United States (including U.S. possessions) at the time the adoption process began.
   
2. A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents’ home.
   
3. The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Factors used by states to make this determination include:
   
   
   
   1. The child’s ethnic background,
      
   2. The child’s age,
      
   3. Whether the child is a member of a minority or sibling group, and
      
   4. Whether the child has a medical condition or a physical, mental, or emotional handicap.

When to take the credit. Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. See the Instructions for Form 8839 for more specific information on when to take the credit.

Foreign child. If the child is not a U.S. citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final.

How to take the credit. Figure your 2014 nonrefundable credit and any carryforward to 2015 on Form 8839 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c and enter “8839” on the line next to that box.

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

You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2014.

Amount of credit. 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. In the case of a foreign manufacturer, you generally can rely on its domestic distributor’s certification to the IRS.

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.

How to take the credit. To take the credit, you must complete Form 8910 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c and enter “8910” on the line next to that box.

More information. For more information on the credit, see the Instructions for Form 8910.

You may be able to take a credit if you place qualified hydrogen refueling property in service in 2014.

Qualified hydrogen refueling property. Qualified hydrogen refueling property is any property (other than a building or its structural components) used for either of the following.

• To store or dispense hydrogen into the fuel tank of a motor vehicle propelled by the hydrogen, but only if the storage or dispensing is at the point where the fuel is delivered into that tank.
  
• To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged.

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Amount of the credit. For personal use property, the credit is generally the smaller of 30% of the property’s cost or $1,000. For business use property, the credit is generally the smaller of 30% of the property’s cost or $30,000.

How to take the credit. To take the credit, you must complete Form 8911 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c and enter “8911” on the line next to that box.

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

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

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

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

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

Interest income. The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return.

How to take the credit. Complete Form 8912 and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54. Check box c and enter “8912” on the line next to that box.

More information. For more information, see the Instructions for Form 8912.

The mortgage interest credit is intended to help lower-income individuals own a home. If you qualify, you can take the credit each year for part of the home mortgage interest you pay.

Who qualifies. You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home.

Amount of credit. Figure your credit on Form 8396. If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year.

If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction.

Certified indebtedness amount on your MCC/Original amount of your mortgage

Limit based on credit rate. If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. See Publication 530 for more information.

Carryforward. Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first.

If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit).

How to take the credit. Figure your 2014 credit and any carryforward to 2015 on Form 8396, and attach it to your Form 1040. Be sure to include any credit carryforward from 2011, 2012, and 2013.

Include the credit in your total for Form 1040, line 54. Check box c and enter “8396” on the line next to that box.

The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. This is called the alternative minimum tax.

The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year’s regular tax.

You may be able to take a credit against your regular tax if for 2013 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 2014, or
  
• An unallowed qualified electric vehicle credit.

How to take the credit. Figure your 2014 nonrefundable credit (if any), and any carryforward to 2015 on Form 8801, and attach it to your Form 1040. Include the credit in your total for Form 1040, line 54, and check box b. You can carry forward any unused credit for prior year minimum tax to later years until it is completely used.

More information. For more information on the credit, see the Instructions for Form 8801.

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 in 2014 and you meet some other requirements.

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

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

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You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.

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 this credit.

Basis reduction. You must reduce the basis of your home by the amount of any credit allowed.

How to take the credit. Complete Form 5695 and attach it to your Form 1040. Enter the credit on Form 1040, line 52.

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

You may be able to take this credit if you, or your spouse if filing jointly, made:

• Contributions (other than rollover contributions) to a traditional or Roth IRA,
  
• Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan,
  
• Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or
  
• Contributions to a 501(c)(18)(D) plan.

However, you cannot take the credit if either of the following applies.

1. The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $30,000 ($45,000 if head of household; $60,000 if married filing jointly).
   
2. The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1997, (b) is claimed as a dependent on someone else’s 2014 tax return, or (c) was a student (defined next).

Student. You were a student if during any part of 5 calendar months of 2014 you:

• Were enrolled as a full-time student at a school, or
  
• Took a full-time, on-farm training course given by a school or a state, county, or local government agency.

School. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.

How to take the credit. Figure the credit on Form 8880. Enter the credit on your Form 1040, line 51, or your Form 1040A, line 34, and attach Form 8880 to your return.

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

The credits discussed in this part of the chapter are treated as payments of tax. If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you.

Premium Tax Credit. The premium tax credit is an advanceable, refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange, beginning in 2014. You can choose to have the credit paid in advance to your insurance company to lower what you pay for your monthly premiums, or you can claim all of the credit when you file your tax return for the year. If you choose to have the credit paid in advance, you will reconcile the amount paid in advance with the actual credit you compute when you file your tax return.