The $3,750, $5,000, or $7,500 credit base amount (34.8) is reduced by nontaxable pensions and Social Security, and also by “excess” adjusted gross income, figured as follows:
The base amount is reduced by:
The base amount is not reduced by military disability pensions received for active service in the armed forces of any country, disability pensions for active service in the National Oceanic and Atmospheric Administration or Public Health Service, certain disability annuities paid under the Foreign Service Act of 1980, and workers’ compensation benefits. However, if Social Security benefits are reduced by workers’ compensation benefits, the amount of workers’ compensation benefits is treated as Social Security benefits that reduce the base.
You reduce the base amount by one-half of adjusted gross income (AGI) exceeding: $7,500 if you are single, head of household, or a qualified widow(er); $10,000 if you are married filing a joint return; or $5,000 if you are married, live apart from your spouse for the entire year, and file a separate return. Applying these income floors, the credit is no longer available to a single person when AGI reaches $17,500, $20,000 on a joint return where one spouse is eligible for the credit, $25,000 on a joint return where both spouses are eligible for the credit, and $12,500 where a married person files separately.
After reducing the credit base amount as just discussed for nontaxable Social Security and pensions and excess AGI, the remaining credit base is multiplied by 15%. This is the maximum credit but where this amount exceeds tax liability, the credit is limited to the lesser liability, as in the following Examples.
Initial base amount (34.8) | $5,000 |
Less: nontaxable Social Security disability | 2,400 |
Less: 50% of AGI over $7,500 (50% of $2,850 excess AGI ($10,350 minus $7,500)) | 1,425 |
Credit base amount | $1,175 |
Credit (15% of credit base amount) | $176 |
Tax liability limitation | $ 61 |
Initial base amount on joint return, two eligible spouses (34.8) | $7,500 |
Less: Nontaxable Social Security | 2,300 |
Less: 50% of AGI over $10,000 (50% of $9,646 excess AGI ($19,646 − $10,000)) | 4,823 |
Credit base amount | $377 |
Credit (15% of credit base amount) | $57 |
Tax liability limitation | $14 |
3.16.135.36