Tax credits and bona fide residents of United States territories

There are two types of tax credits:

• Nonrefundable tax credits which can reduce your tax. However, if the total of these credits is more than your tax, the excess isn't refunded to you.
• Refundable tax credits which 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.

Bona fide residents of U.S. territories may be eligible for certain tax credits. However, the way in which the credits may be claimed will be different than U.S. residents.

Generally, you are a bona fide resident of a U.S. territory if, during the tax year, you:

• Meet the presence test,
• Do not have a tax home outside that territory, and
• Do not have a closer connection to the United States or to a foreign country than to that territory.

For a detailed explanation of the U.S. territory residency rules, please refer to Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

There are special rules for service members and civilian spouses of active duty members of the U.S. Armed Forces. For a detailed explanation of the U.S. territory residency rules for U.S. service members and civilian spouses, please refer to Chapter 1, Bona Fide Residence in Publication 570. Additional information specific to each territory can be found in Chapter 3, Filing Information for Individuals in Certain U.S. Possessions.

If you became or ceased to be a bona fide resident of a U.S. territory, you may need to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession. If you are required to file Form 8898 for any tax year, and you fail to file it or do not include all the information required by the form or the form includes incorrect information, you may be subject to a penalty. For a detailed explanation of filing requirements and general instructions for this form, please refer to the instructions for Form 8898.

For territory specific information on tax credits, please refer to:

• Bona fide residents of American Samoa - Tax credits
• Bona fide residents of the Commonwealth of Puerto Rico - Tax credits
• Bona fide residents of the Commonwealth of the Northern Mariana Islands - Tax credits
• Bona fide residents of Guam - Tax credits
• Bona fide residents of the U.S. Virgin Islands - Tax credits