You may be able to take a tax credit of up to $11,390 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 $170,820, your credit is reduced. If your modified AGI is $210,820 or more, you cannot take the credit.

You may be able to take a credit if you place an alternative motor vehicle in service in 2007.

Phaseout of credit.   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification of the maximum credit allowable as explained above. However, if you purchased a qualified hybrid or advanced lean burn technology vehicle from a manufacturer who previously sold at least 60,000 of these vehicles, the amount of your credit may be reduced. Your manufacturer should give you the information you need to figure your phaseout percentage. See the Form 8910 instructions.

  

The phaseout period has begun for certain qualified hybrid vehicles purchased for use or lease in 2007. See IRS news article, Summary of the Credit for Qualified Hybrid Vehicles, on the Internet at www.irs.gov/newsroom/article/0,,id=157557,00.html.

You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2007.

You may be able to take a credit if you are a holder of a clean renewable energy bond (CREB) or Gulf tax credit bond (GTCB). CREBs are tax credit bonds issued after 2005 by certain tax-exempt electricity providers to finance renewable energy projects. GTCBs are tax credit bonds issued after 2005 by the state of Alabama, Louisiana, or Mississippi that are designated by the governor of those states as GTCBs and that meet certain other requirements. The issuers do not pay interest on both types of bonds. Instead of receiving interest, the bondholders qualify to claim a tax credit.

You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U.S. possession as a credit against your U.S. income tax. Or, you can deduct them as an itemized deduction (see chapter 22).

You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U.S. tax under any of the following.

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.

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 2006 you had:

The amount of the credit cannot reduce your current year's tax below your current year's tentative alternative minimum tax.

You may be eligible for 2 credits, the nonbusiness energy property credit and the residential energy efficient property credit, if you made energy saving improvements to your home.

For more information about the residential energy efficient property credit, see the instructions for Form 5695.

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

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

You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. The mutual fund or REIT will send you Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, showing your share of the undistributed capital gains and the tax paid, if any. Take the credit for the tax paid by entering the amount on Form 1040, line 70, and checking box a. Attach Copy B of Form 2439 to your return. See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains.

You may be able to take this credit for any month in which all the following statements were true on the first day of the month.

But, you cannot take the credit if you can be claimed as a dependent on someone else's 2007 tax return. If you meet all of these conditions, you may be able to take a credit of up to 65% of the amount you paid for qualified health insurance coverage for you and any qualifying family members. The amount you paid for qualified health insurance coverage must be reduced by any (a) Archer MSA and health savings account distributions used to pay for the coverage, and (b) National Emergency Grants you received for health insurance in 2007.

You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return.

For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, and employer-sponsored health insurance plans, see Publication 502 and the instructions for Form 8885.

If you paid the alternative minimum tax for 2006 or you had a minimum tax credit carryforward to 2007, you may be able to take a credit for prior year minimum tax. For information about the nonrefundable credit for prior year minimum tax you may be able to take, see Nonrefundable Credit for Prior Year Minimum Tax, earlier. However, for 2007, you may qualify for a refundable credit for prior year minimum tax if you have any unused minimum tax credit carryforward from 2004 or earlier years, even if the total amount of your current year credit is more than your total tax liability. To figure the amount of any 2007 refundable credit, complete Part IV of Form 8801. Include any refundable credit on Form 1040, line 71. You can carry forward any unused credit for prior year minimum tax to later years.

Most employers must withhold social security tax from your wages. If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax.

If you worked for two or more employers in 2007, you may have had too much social security or tier 1 RRTA tax withheld from your pay. You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax. The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2007.