Subpart A - Nonrefundable Personal Credits

26 USC 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 for which there are 1 or more qualifying individuals (as defined in subsection (b)(1)) with respect to such individual, 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 35 percent reduced (but not below 20 percent) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayers adjusted gross income for the taxable year exceeds $15,000.
(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 (as defined in section 152 (a)(1)) who has not attained age 13,
(B) a dependent of the taxpayer (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, or
(C) the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.
(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 taxpayers 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 taxpayers 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 taxpayers household.
(C) Dependent care centers 
Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the taxpayers 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) $3,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or
(2) $6,000 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 individuals 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 individuals 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) $250 if subsection (c)(1) applies for the taxable year, or
(B) $500 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) Place of abode 
An individual shall not be treated as having the same principal place of abode of the taxpayer if at any time during the taxable year of the taxpayer the relationship between the individual and the taxpayer is in violation of local law.
(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 individuals 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) 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 (as defined in section 152 (e)(4)(A)), 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 152 (f)(1)) 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.

26 USC 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 individuals 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 individuals 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.

26 USC 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.
(3) $10,000 credit for adoption of child with special needs regardless of expenses 
In the case of an adoption of a child with special needs which becomes final during a taxable year, the taxpayer shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years.
(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 $10,000.
(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 taxpayers adjusted gross income exceeds $150,000, 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.
(4) Limitation based on amount of tax 
In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year shall not exceed the excess of
(A) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over
(B) the sum of the credits allowable under this subpart (other than this section) and section 27 for the taxable year.
(c) Carryforwards of unused credit 

(1) Rule for years in which all personal credits allowed against regular and alternative minimum tax 
In the case of a taxable year to which section 26 (a)(2) applies, if the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26 (a)(2) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 25D and 1400C), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.
(2) Rule for other years 
In the case of a taxable year to which section 26 (a)(2) does not apply, if the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by subsection (b)(4) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.
(3) Limitation 
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 individuals spouse, and
(D) which are not reimbursed under an employer program or otherwise.
(2) Eligible child 
The term eligible child means any individual who
(A) has not attained age 18, or
(B) is physically or mentally incapable of caring for himself.
(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) Adjustments for inflation 
In the case of a taxable year beginning after December 31, 2002, each of the dollar amounts in subsection (a)(3) and paragraphs (1) and (2)(A)(i) of subsection (b) shall be increased by an amount equal to
(1) such dollar amount, multiplied by
(2) 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 2001 for calendar year 1992 in subparagraph (B) thereof.

If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.

(i) 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 amounts in subsections (a)(3) and (b)(1) of this section and in section 137 (b)(1).

26 USC 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 $1,000.
(b) Limitations 

(1) Limitation based on adjusted gross income 
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 taxpayers 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.

(3) Limitation based on amount of tax 
In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year shall not exceed the excess of
(A) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over
(B) the sum of the credits allowable under this subpart (other than this section and sections 23 and 25B) and section 27 for the taxable year.
(c) Qualifying child 
For purposes of this section
(1) In general 
The term qualifying child means a qualifying child of the taxpayer (as defined in section 152 (c)) who has not attained age 17.
(2) Exception for certain noncitizens 
The term qualifying child shall not include any individual who would not be a dependent if subparagraph (A) of section 152 (b)(3) were applied without regard to all that follows resident of the United States.
(d) Portion of credit refundable 

(1) In general 
The aggregate credits allowed to a taxpayer 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)(2) or subsection (b)(3), as the case may be, or
(B) the amount by which the aggregate amount of credits allowed by this subpart (determined without regard to this subsection) would increase if the limitation imposed by section 26 (a)(2) or subsection (b)(3), as the case may be, were increased by the greater of
(i) 15 percent of so much of the taxpayers earned income (within the meaning of section 32) which is taken into account in computing taxable income for the taxable year as exceeds $10,000, or
(ii) in the case of a taxpayer with 3 or more qualifying children, the excess (if any) of
(I) the taxpayers social security taxes for the taxable year, over
(II) the credit allowed under section 32 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) or subsection (b)(3), as the case may be. For purposes of subparagraph (B), any amount excluded from gross income by reason of section 112 shall be treated as earned income which is taken into account in computing taxable income for the taxable year.

(2) 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) 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.
(3) Inflation adjustment 
In the case of any taxable year beginning in a calendar year after 2001, the $10,000 amount contained in paragraph (1)(B) shall be increased by an amount equal to
(A) such dollar amount, multiplied by
(B) 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.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.

(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.

26 USC 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 taxpayers 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
(i) in the case of a taxable year to which section 26 (a)(2) applies, the limitation imposed by section 26 (a)(2) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 25D, and 1400C), and
(ii) in the case of a taxable year to which section 26 (a)(2) does not apply, the limitation imposed by section 26 (a)(1) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 24, 25B, 25D, 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 certificates 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).

26 USC 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 1/2 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 (20 U.S.C. 1091 (a)(1)), as in effect on the date of the enactment of this section, and
(B) is carrying at least 1/2 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 taxpayers 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 not to have section apply 
A taxpayer may elect not to have this section apply with respect to the qualified tuition and related expenses of an individual for any taxable year.
(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 taxpayers 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 individuals 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 individuals 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 (20 U.S.C. 1088), as in effect on the date of the enactment of this section, and
(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 chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under chapter 1606 of title 10, United States Code, and
(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102 (a)) for such individuals educational expenses, or attributable to such individuals 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 individuals taxable year begins
(A) no credit shall be allowed under subsection (a) to such individual for such individuals taxable year, and
(B) qualified tuition and related expenses paid by such individual during such individuals 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 taxpayers 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.

26 USC 25B - Elective deferrals and IRA contributions by certain individuals

(a) Allowance of credit 
In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the applicable percentage of so much of the qualified retirement savings contributions of the eligible individual for the taxable year as do not exceed $2,000.
(b) Applicable percentage 
For purposes of this section
(1) Joint returns 
In the case of a joint return, the applicable percentage is
(A) if the adjusted gross income of the taxpayer is not over $30,000, 50 percent,
(B) if the adjusted gross income of the taxpayer is over $30,000 but not over $32,500, 20 percent,
(C) if the adjusted gross income of the taxpayer is over $32,500 but not over $50,000, 10 percent, and
(D) if the adjusted gross income of the taxpayer is over $50,000, zero percent.
(2) Other returns 
In the case of
(A) a head of household, the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 75 percent of such dollar amount, and
(B) any taxpayer not described in paragraph (1) or subparagraph (A), the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 50 percent of such dollar amount.
(3) Inflation adjustment 
In the case of any taxable year beginning in a calendar year after 2006, each of the dollar amounts in paragraph (1) shall be increased by an amount equal to
(A) such dollar amount, multiplied by
(B) 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 2005 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $500.

(c) Eligible individual 
For purposes of this section
(1) In general 
The term eligible individual means any individual if such individual has attained the age of 18 as of the close of the taxable year.
(2) Dependents and full-time students not eligible 
The term eligible individual shall not include
(A) any individual with respect to whom a deduction under section 151 is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individuals taxable year begins, and
(B) any individual who is a student (as defined in section 152 (f)(2)).
(d) Qualified retirement savings contributions 
For purposes of this section
(1) In general 
The term qualified retirement savings contributions means, with respect to any taxable year, the sum of
(A) the amount of the qualified retirement contributions (as defined in section 219 (e)) made by the eligible individual,
(B) the amount of
(i) any elective deferrals (as defined in section 402(g)(3)) of such individual, and
(ii) any elective deferral of compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457 (e)(1)(A), and
(C) the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974 (c)).
(2) Reduction for certain distributions 

(A) In general 
The qualified retirement savings contributions determined under paragraph (1) shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph (1) may be made. The preceding sentence shall not apply to the portion of any distribution which is not includible in gross income by reason of a trustee-to-trustee transfer or a rollover distribution.
(B) Testing period 
For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes
(i) such taxable year,
(ii) the 2 preceding taxable years, and
(iii) the period after such taxable year and before the due date (including extensions) for filing the return of tax for such taxable year.
(C) Excepted distributions 
There shall not be taken into account under subparagraph (A)
(i) any distribution referred to in section 72 (p), 401 (k)(8), 401 (m)(6), 402 (g)(2), 404 (k), or 408 (d)(4), and
(ii) any distribution to which section 408A (d)(3) applies.
(D) Treatment of distributions received by spouse of individual 
For purposes of determining distributions received by an individual under subparagraph (A) for any taxable year, any distribution received by the spouse of such individual shall be treated as received by such individual if such individual and spouse file a joint return for such taxable year and for the taxable year during which the spouse receives the distribution.
(e) Adjusted gross income 
For purposes of this section, adjusted gross income shall be determined without regard to sections 911, 931, and 933.
(f) Investment in the contract 
Notwithstanding any other provision of law, a qualified retirement savings contribution shall not fail to be included in determining the investment in the contract for purposes of section 72 by reason of the credit under this section.
(g) Limitation based on amount of tax 
In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for the taxable year shall not exceed the excess of
(1) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over
(2) the sum of the credits allowable under this subpart (other than this section and section 23) and section 27 for the taxable year.

26 USC 25C - Nonbusiness energy property

(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 an amount equal to the sum of
(1) 10 percent of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during such taxable year, and
(2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year.
(b) Limitations 

(1) Lifetime limitation 
The credit allowed under this section with respect to any taxpayer for any taxable year shall not exceed the excess (if any) of $500 over the aggregate credits allowed under this section with respect to such taxpayer for all prior taxable years.
(2) Windows 
In the case of amounts paid or incurred for components described in subsection (c)(2)(B) by any taxpayer for any taxable year, the credit allowed under this section with respect to such amounts for such year shall not exceed the excess (if any) of $200 over the aggregate credits allowed under this section with respect to such amounts for all prior taxable years.
(3) Limitation on residential energy property expenditures 
The amount of the credit allowed under this section by reason of subsection (a)(2) shall not exceed
(A) $50 for any advanced main air circulating fan,
(B) $150 for any qualified natural gas, propane, or oil furnace or hot water boiler, and
(C) $300 for any item of energy-efficient building property.
(c) Qualified energy efficiency improvements 
For purposes of this section
(1) In general 
The term qualified energy efficiency improvements means any energy efficient building envelope component which meets the prescriptive criteria for such component established by the 2000 International Energy Conservation Code, as such Code (including supplements) is in effect on the date of the enactment of this section (or, in the case of a metal roof with appropriate pigmented coatings which meet the Energy Star program requirements), if
(A) such component is installed in or on a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayers principal residence (within the meaning of section 121),
(B) the original use of such component commences with the taxpayer, and
(C) such component reasonably can be expected to remain in use for at least 5 years.
(2) Building envelope component 
The term building envelope component means
(A) any insulation material or system which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit,
(B) exterior windows (including skylights),
(C) exterior doors, and
(D) any metal roof installed on a dwelling unit, but only if such roof has appropriate pigmented coatings which are specifically and primarily designed to reduce the heat gain of such dwelling unit.
(3) Manufactured homes included 
The term dwelling unit includes a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (part 3280 of title 24, Code of Federal Regulations).
(d) Residential energy property expenditures 
For purposes of this section
(1) In general 
The term residential energy property expenditures means expenditures made by the taxpayer for qualified energy property which is
(A) installed on or in connection with a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayers principal residence (within the meaning of section 121), and
(B) originally placed in service by the taxpayer.

Such term includes expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property.

(2) Qualified energy property 

(A) In general 
The term qualified energy property means
(i) energy-efficient building property,
(ii) a qualified natural gas, propane, or oil furnace or hot water boiler, or
(iii) an advanced main air circulating fan.
(B) Performance and quality standards 
Property described under subparagraph (A) shall meet the performance and quality standards, and the certification requirements (if any), which
(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy or the Administrator of the Environmental Protection Agency, as appropriate), and
(ii) are in effect at the time of the acquisition of the property, or at the time of the completion of the construction, reconstruction, or erection of the property, as the case may be.
(C) Requirements for standards 
The standards and requirements prescribed by the Secretary under subparagraph (B)
(i) in the case of the energy efficiency ratio (EER) for central air conditioners and electric heat pumps
(I) shall require measurements to be based on published data which is tested by manufacturers at 95 degrees Fahrenheit, and
(II) may be based on the certified data of the Air Conditioning and Refrigeration Institute that are prepared in partnership with the Consortium for Energy Efficiency, and
(ii) in the case of geothermal heat pumps
(I) shall be based on testing under the conditions of ARI/ISO Standard 132561 for Water Source Heat Pumps or ARI 870 for Direct Expansion GeoExchange Heat Pumps (DX), as appropriate, and
(II) shall include evidence that water heating services have been provided through a desuperheater or integrated water heating system connected to the storage water heater tank.
(3) Energy-efficient building property 
The term energy-efficient building property means
(A) an electric heat pump water heater which yields an energy factor of at least 2.0 in the standard Department of Energy test procedure,
(B) an electric heat pump which has a heating seasonal performance factor (HSPF) of at least 9, a seasonal energy efficiency ratio (SEER) of at least 15, and an energy efficiency ratio (EER) of at least 13,
(C) a geothermal heat pump which
(i) in the case of a closed loop product, has an energy efficiency ratio (EER) of at least 14.1 and a heating coefficient of performance (COP) of at least 3.3,
(ii) in the case of an open loop product, has an energy efficiency ratio (EER) of at least 16.2 and a heating coefficient of performance (COP) of at least 3.6, and
(iii) in the case of a direct expansion (DX) product, has an energy efficiency ratio (EER) of at least 15 and a heating coefficient of performance (COP) of at least 3.5,
(D) a central air conditioner which achieves the highest efficiency tier established by the Consortium for Energy Efficiency, as in effect on January 1, 2006, and
(E) a natural gas, propane, or oil water heater which has an energy factor of at least 0.80.
(4) Qualified natural gas, propane, or oil furnace or hot water boiler 
The term qualified natural gas, propane, or oil furnace or hot water boiler means a natural gas, propane, or oil furnace or hot water boiler which achieves an annual fuel utilization efficiency rate of not less than 95.
(5) Advanced main air circulating fan 
The term advanced main air circulating fan means a fan used in a natural gas, propane, or oil furnace and which has an annual electricity use of no more than 2 percent of the total annual energy use of the furnace (as determined in the standard Department of Energy test procedures).
(e) Special rules 
For purposes of this section
(1) Application of rules 
Rules similar to the rules under paragraphs (4), (5), (6), (7), (8), and (9) of section 25D (e) shall apply.
(2) Joint ownership of energy items 

(A) In general 
Any expenditure otherwise qualifying as an expenditure under this section shall not be treated as failing to so qualify merely because such expenditure was made with respect to two or more dwelling units.
(B) Limits applied separately 
In the case of any expenditure described in subparagraph (A), the amount of the credit allowable under subsection (a) shall (subject to paragraph (1)) be computed separately with respect to the amount of the expenditure made for each dwelling unit.
(f) 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.
(g) Termination 
This section shall not apply with respect to any property placed in service after December 31, 2007.

26 USC 25D - Residential energy efficient property

(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 an amount equal to the sum of
(1) 30 percent of the qualified solar electric property expenditures made by the taxpayer during such year,
(2) 30 percent of the qualified solar water heating property expenditures made by the taxpayer during such year, and
(3) 30 percent of the qualified fuel cell property expenditures made by the taxpayer during such year.
(b) Limitations 

(1) Maximum credit 
The credit allowed under subsection (a) (determined without regard to subsection (c)) for any taxable year shall not exceed
(A) $2,000 with respect to any qualified solar electric property expenditures,
(B) $2,000 with respect to any qualified solar water heating property expenditures, and
(C) $500 with respect to each half kilowatt of capacity of qualified fuel cell property (as defined in section 48 (c)(1)) for which qualified fuel cell property expenditures are made.
(2) Certification of solar water heating property 
No credit shall be allowed under this section for an item of property described in subsection (d)(1) unless such property is certified for performance by the non-profit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which such property is installed.
(c) Carryforward of unused credit 

(1) Rule for years in which all personal credits allowed against regular and alternative minimum tax 
In the case of a taxable year to which section 26 (a)(2) applies, if the credit allowable under subsection (a) exceeds the limitation imposed by section 26 (a)(2) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.
(2) Rule for other years 
In the case of a taxable year to which section 26 (a)(2) does not apply, if the credit allowable under subsection (a) exceeds the limitation imposed by section 26 (a)(1) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 24, and 25B), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.
(d) Definitions 
For purposes of this section
(1) Qualified solar water heating property expenditure 
The term qualified solar water heating property expenditure means an expenditure for property to heat water for use in a dwelling unit located in the United States and used as a residence by the taxpayer if at least half of the energy used by such property for such purpose is derived from the sun.
(2) Qualified solar electric property expenditure 
The term qualified solar electric property expenditure means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer.
(3) Qualified fuel cell property expenditure 
The term qualified fuel cell property expenditure means an expenditure for qualified fuel cell property (as defined in section 48 (c)(1)) installed on or in connection with a dwelling unit located in the United States and used as a principal residence (within the meaning of section 121) by the taxpayer.
(e) Special rules 
For purposes of this section
(1) Labor costs 
Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in subsection (d) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.
(2) Solar panels 
No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d) solely because it constitutes a structural component of the structure on which it is installed.
(3) Swimming pools, etc., used as storage medium 
Expenditures which are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage shall not be taken into account for purposes of this section.
(4) Dollar amounts in case of joint occupancy 
In the case of any dwelling unit which is jointly occupied and used during any calendar year as a residence by two or more individuals the following rules shall apply:
(A) Maximum expenditures.— 
The maximum amount of expenditures which may be taken into account under subsection (a) by all such individuals with respect to such dwelling unit during such calendar year shall be
(i) $6,667 in the case of any qualified solar electric property expenditures,
(ii) $6,667 in the case of any qualified solar water heating property expenditures, and
(iii) $1,667 in the case of each half kilowatt of capacity of qualified fuel cell property (as defined in section 48 (c)(1)) for which qualified fuel cell property expenditures are made.
(B) Allocation of expenditures.— 
The expenditures allocated to any individual for the taxable year in which such calendar year ends shall be an amount equal to the lesser of
(i) the amount of expenditures made by such individual with respect to such dwelling during such calendar year, or
(ii) the maximum amount of such expenditures set forth in subparagraph (A) multiplied by a fraction
(I) the numerator of which is the amount of such expenditures with respect to such dwelling made by such individual during such calendar year, and
(II) the denominator of which is the total expenditures made by all such individuals with respect to such dwelling during such calendar year.
(C) Subparagraphs (A) and (B) shall be applied separately with respect to expenditures described in paragraphs (1), (2), and (3) of subsection (d).
(5) Tenant-stockholder in cooperative housing corporation 
In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having made his tenant-stockholders proportionate share (as defined in section 216(b)(3)) of any expenditures of such corporation.
(6) Condominiums 

(A) In general 
In the case of an individual who is a member of a condominium management association with respect to a condominium which the individual owns, such individual shall be treated as having made the individuals proportionate share of any expenditures of such association.
(B) Condominium management association 
For purposes of this paragraph, the term condominium management association means an organization which meets the requirements of paragraph (1) of section 528 (c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.
(7) Allocation in certain cases 
If less than 80 percent of the use of an item is for nonbusiness purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness purposes shall be taken into account.
(8) When expenditure made; amount of expenditure 

(A) In general 
Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.
(B) Expenditures part of building construction 
In the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.
(9) Property financed by subsidized energy financing 
For purposes of determining the amount of expenditures made by any individual with respect to any dwelling unit, there shall not be taken into account expenditures which are made from subsidized energy financing (as defined in section 48 (a)(4)(C)).
(f) 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.
(g) Termination 
The credit allowed under this section shall not apply to property placed in service after December 31, 2008.

26 USC 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 (other than sections 23, 24, and 25B) for the taxable year shall not exceed the excess (if any) of
(A) the taxpayers 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 taxpayers tentative minimum tax for any taxable year beginning during 1999 shall be treated as being zero.

(2) Special rule for taxable years 2000 through 2007 
For purposes of any taxable year beginning during 2000, 2001, 2002, 2003, 2004, 2005, 2006, or 2007, the aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of
(A) the taxpayers 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)(4) (relating to additional tax on certain distributions from Coverdell education savings 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 860K1 (relating to treatment of transfers of high-yield interests to disqualified holders),
(Q) section 220 (f)(4) (relating to additional tax on Archer MSA distributions not used for qualified medical expenses),
(R) section 138 (c)(2) (relating to penalty for distributions from Medicare Advantage MSA not used for qualified medical expenses if minimum balance not maintained),
(S) sections 106 (e)(3)(A)(ii), 223 (b)(8)(B)(i)(II), and 408 (d)(9)(D)(i)(II) (relating to certain failures to maintain high deductible health plan coverage),
(T) section 170 (o)(3)(B) (relating to recapture of certain deductions for fractional gifts),
(U) section 223 (f)(4) (relating to additional tax on health savings account distributions not used for qualified medical expenses), and
(V) subsections (a)(1)(B)(i) and (b)(4)(A) of section 409A (relating to interest and additional tax with respect to certain deferred compensation).
(c) Tentative minimum tax 
For purposes of this part, the term tentative minimum tax means the amount determined under section 55 (b)(1).
[1] See References in Text note below.