804 INCOME TAX Credi ts against t ax . Earned income. Definitions . "Ear ned incom e" means wages, etc ., for personal services . Allowance for per- sonal services if com- bined with capital in business. " Earne d in come de- ductions" allowed for computing net income . "E arned net in- come," excess over de- ductions. Maximum. I ndivi dual all owed credit for normal tax for earned income . Limitations . Addition to all other credits . Taxes of foreign coun- tries, etc. Extent of credit for . Post,p. 829. Ta xes withhel d at sou rce . Cre dit for . Post, p . 833 . Erroneous payments . Credit allowed . Post, p.861. Credit for year be- ginning in 1927 and end ing in 1928 . Post, p. 830. SEVENTIETH CONGRESS . SESS. I . CH. 852. 1928 . Part III-Credits Against Tax SEC . 31 . EARNED INCOME CREDIT . (a) Definitions .-For the purposes of this section- (1 ) " Earn ed inco me " means wa ges, sala ries, pro fessional fees, and other amounts received as compensation for personal services actually rendered, but does not include that part of the com- pensation derived by the taxpayer for personal services rendered by him to a corporation which represents a distribution of earn- ings or profits rather than a reasonable allowance as compensa- tion for the personal services actually rendered . In the case of a taxpayer engaged in a trade or business in which both personal services and capital are material income producing factors, a reasonable allowance as compensation for the personal services actually rendered by the taxpayer, not in excess of 20 per centum of his share of the net profits of such trade or business, shall be con sidere d as e arned income . (2) "Ea rned inc ome dedu ctio ns" mea ns s uch dedu cti ons as are allowed by section 23 for the purpose of computing net income, and are properly allocable to or chargeable against earned income . (3) " Earned net income " means the excess of the amount of the earned income over the sum of the earned income deductions . If the taxpayer's net income is not more than $5,000, his entire net income shall be considered to be earned net income, and if his net income is more than $5,000, his earned net income shall not b e cons idered to be less than $ 5,000 . In no case shall the earned net income be considered to be more than $30,000 . (b) Allowance of credit .-In the case of an individual the tax shall be credited with 25 per centum of the amount of tax which would be payable if his earned net income constituted his entire net income ; but in no case shall the credit allowed under this subsection exceed 25 per centum of his normal tax plus 25 per centum of the surtax which would be payable if his earned net income constituted his entire net income. This credit shall be in addition to all other credits a gainst th e tax . SEC . 32 . TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF UNITED STATES . The amount of income, war-profits, and excess-profits taxes impos ed by fore ign count ries or p osses sions of t he U nited Stat es shall be allowed as a credit against the tax, to the extent provided in section 131 . SEC . 33 . TAXES WITHHELD AT SOURCE . The amount of tax withheld at the source under section 144 shall be allowed as a credit against the tax . SEC . 34 . ERRONEOUS PAYMENTS . (a) Credit for overpayments .-For credit against the tax of overpay- ments of taxes imposed by this title for other taxable years, see section 322 . (b) Fiscal year ending in 1928 .-For credit against the tax of amounts of tax paid for a fiscal year beginning in 1927 and ending in 1928, see section 132 .
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