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TITLE 26-INTERNAL REVENUE CODE (1) In general An individual's section 37 amount for the taxable year is the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (c). (2) Initial amount The initial amount is- (A) $2,500 in the case of a single individ- ual, (B) $2,500 in the case of a joint return where only one spouse is eligible for the credit under subsection (a), (C) $3,750 in the case of a Joint return where both spouses are eligible for the credit under subsection (a), or (D) $1,875 in the case of a married Individ- ual filing a separate return. (3) Reduction The reduction under this paragraph is an amount equal to the sum of the amounts re- ceived by the individual (or, in the case of a joint return, by either spouse) as a pension or annuity-- (A) under title II of the Social Security Act, (B) under the Railroad Retirement Act of 1935 or 1937, or (C) otherwise excluded from gross income. No reduction shall be made under this para- graph for any amount excluded from gross income under section 72 (relating to annu- ities), 101 (relating to life insurance pro- ceeds), 104 (relating to compensation for in- juries or sickness), 105 (relating to amounts received under accident and health plans), 120 (relating to amounts received under quali- fied group legal services plans), 402 (relating to taxability of beneficiary of employees' trust), 403 (relating to taxation of employee annuities), or 405 (relating to qualified bond purchase plans). (c) Limitations (1) Adjusted gross income limitation If the adjusted gross income of the taxpay- er exceeds- (A) $7,500 in the case of a single individ- ual, (B) $10,000 in the case of a joint return, or (C) $5,000 in the case of a married individ- ual filing a separate return, the section 37 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. (2) Limitation based on amount of tax The amount of the credit allowed by this section for the taxable year shall not exceed the amount of the tax imposed by this chap- ter for such taxable year. (d) 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 tax. able year. (2) Marital status Marital status shall be determined under section 143. (3) Joint return The term "Joint return" means the joint return of a husband and wife made under sec- tion 6013. (e) Election of prior law with respect to public retire- ment system income (I) In general In the case of a taxpayer who has not at- tained age 65 before the close of the taxable year (other than a married individual whose spouse has attained age 65 before the close of the taxable year), his credit (if any) under this section shall be determined under this subsection. (2) One spouse age 65 or over In the case of a married individual who has not attained age 65 before the close of the taxable year but whose spouse has attained such age, this paragraph shall apply for the taxable year only if both spouses elect, at such time and in such manner as the Secre- tary shall by regulations prescribe, to have this paragraph apply. If this paragraph ap- plies for the taxable year, the credit (if any) of each spouse under this section shall be de- termined under this subsection. (3) Computation of credit In the case of an individual whose credit under this section for the taxable year is de- termined under this subsection, 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 the amount received by such individual as retirement income (as de- fined in paragraph (4) and as limited by para- graph (5)). (4) Retirement income For purposes of this subsection, the term "retirement income" means- (A) in the case of an individual who has attained age 65 before the close of the tax- able year, income from- (i) pensions and annuities (including, in the case of an individual who is, or has been, an employee within the meaning of section 401(c)(1), distributions by a trust described in section 401(a) which is exempt from tax under section 501(a)), (ii) interest, (iii) rents, (iv) dividends, (v) bonds described in section 405(b)(1) which are received under a qualified bond purchase plan described in section 405(a) or in a distribution from a trust described in section 401(a) which is exempt from tax under section 501(a), or retirement bonds described in section 409, and (vi) an individual retirement account de- scribed in section 408(a) or an individual retirement annuity described in section 408(b), or Page 41