gross income For purposes of subparagraph (A), the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (C) Applicable Area Median Income For purposes of subparagraph (A), the term applicable Area Median Income means the Area Median Income set by the Secretary of Housing and Urban Development with respect to— (i) the area in which the principal residence is located, (ii) the size of the household of the taxpayer, and (iii) the calendar year in which the principal residence is purchased. (D) Regulations and guidance The Secretary, after consultation with the Secretary of Housing and Urban Development, shall issue such regulations and guidance as are necessary to carry out the purposes of this subparagraph. (3) Limitation based on area median purchase price (A) In general The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as— (i) the excess (if any) of— (I) the purchase price of the principal residence, over (II) the amount which is equal to 110 percent of the area median purchase price, bears to (ii) the amount which is equal to 15 percent of the area median purchase price. (B) Area median purchase price For purposes of this paragraph, the term area median purchase price means the median purchase price for a home in both the area and the calendar year in which the purchase of the principal residence takes place. (C) Regulations and guidance The Secretary, after consultation with the Secretary of Housing and Urban Development, shall promulgate such regulations and guidance as are necessary to carry out the purposes of this subparagraph, including for determining the area median purchase price with respect to different localities. (4) Inflation adjustment In the case of any taxable year beginning in a calendar year after