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previous page Previous Page: Publication 571 - Tax-Sheltered Annuity Plans (403(b) Plans) - Worksheets
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taxmap/pubs/p571-026.htm#en_us_publink1000129503

Chapter 10
Retirement Savings Contributions Credit(p19)

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previous topic occurrence Retirement Savings Contributions Credit next topic occurrence

If you or your employer make eligible contributions (defined later) to a retirement plan, you may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly). This credit could reduce the federal income tax you pay dollar for dollar.
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Can you claim the credit?(p19)


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If you or your employer make eligible contributions to a retirement plan, you can claim the credit if all of the following apply.
  1. You are not under age 18.
  2. You are not a full-time student (explained later).
  3. No one else, such as your parent(s), claims an exemption for you on their tax return.
  4. Your adjusted gross income (defined later) is not more than:
    1. $53,000 ($55,500 for 2009) if your filing status is married filing jointly,
    2. $39,750 ($41,625 for 2009) if your filing status is head of household (with qualifying person), or
    3. $26,500 ($27,750 for 2009) if your filing status is single, married filing separately, or qualifying widow(er) with dependent child.
taxmap/pubs/p571-026.htm#en_us_publink1000129505

Full-time student.(p19)
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You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either: You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full-time.
taxmap/pubs/p571-026.htm#en_us_publink1000129506

Adjusted gross income.(p19)
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This is generally the amount on line 37 of your 2008 Form 1040 or line 21 of your 2008 Form 1040A. However, you must add to that amount any exclusion or deduction claimed for the year for:
taxmap/pubs/p571-026.htm#en_us_publink1000129507

Eligible contributions.(p19)


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These include:
  1. Contributions to a traditional or Roth IRA, and
  2. Salary reduction contributions (elective deferrals) to:
    1. A 401(k) plan (including a SIMPLE 401(k)),
    2. A section 403(b) annuity,
    3. An eligible deferred compensation plan of a state or local government (a 457 plan),
    4. A SIMPLE IRA plan, or
    5. A salary reduction SEP.
They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or a section 403(b) annuity.
For purposes of this credit, an employee contribution will be voluntary as long as it is not required as a condition of employment.
taxmap/pubs/p571-026.htm#en_us_publink1000129508

Reducing eligible contributions.(p19)


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Reduce your eligible contributions (but not below zero) by the total distributions you received during the testing period (defined later) from any IRA, plan, or annuity to which eligible contributions can be made. However, do not reduce your eligible contributions by the portion of any distribution which is not includible in income because it is a trustee-to-trustee transfer or a rollover distribution.
Reduce your eligible contributions by any distribution from a Roth IRA that is not rolled over, even if the distribution is not taxable.
Do not reduce your eligible contributions by any distribution that is a return of a contribution to an IRA (including a Roth IRA) made during the year for which you claim the credit if:
  1. The distribution is made before the due date (including extensions) of your tax return for that year,
  2. You do not take a deduction for the contribution, and
  3. The distribution includes any income attributable to the contribution.
taxmap/pubs/p571-026.htm#en_us_publink1000129509

Distributions received by spouse.(p19)
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Any distributions your spouse receives are treated as received by you if you file a joint return with your spouse both for the year of the distribution and for the year for which you claim the credit.
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Testing period.(p19)
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The testing period consists of:
taxmap/pubs/p571-026.htm#en_us_publink1000129511

Example.(p19)

You and your spouse filed joint returns in 2006 and 2007, and plan to do so in 2008 and 2009. You received a taxable distribution from a qualified plan in 2006 and a taxable distribution from an eligible section 457(b) deferred compensation plan in 2007. Your spouse received taxable distributions from a Roth IRA in 2008 and tax-free distributions from a Roth IRA in 2009 before April 15. You made eligible contributions to an IRA in 2008 and you otherwise qualify for this credit. You must reduce the amount of your qualifying contributions in 2008 by the total of the distributions you and your spouse received in 2006, 2007, 2008, and 2009.
taxmap/pubs/p571-026.htm#en_us_publink1000129512

Maximum eligible contributions.(p19)


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After your contributions are reduced, the maximum annual contribution on which you can base the credit is $2,000 per person.
taxmap/pubs/p571-026.htm#en_us_publink1000129513

Effect on other credits.(p19)


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The amount of this credit will not change the amount of your refundable tax credits. A refundable tax credit, such as the earned income credit or the additional child tax credit, is an amount that you would receive as a refund even if you did not otherwise owe any taxes.
taxmap/pubs/p571-026.htm#en_us_publink1000129514

Maximum credit.(p19)


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This is a nonrefundable credit. The amount of the credit in any year cannot be more than the amount of tax that you would otherwise pay (not counting any refundable credits or the adoption credit) in any year. If your tax liability is reduced to zero because of other nonrefundable credits, such as the education credits, then you will not be entitled to this credit.
taxmap/pubs/p571-026.htm#en_us_publink1000129515

How to figure and report the credit.(p19)


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The amount of the credit you can get is based on the contributions you make and your credit rate. The credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status. See Form 8880, Credit for Qualified Retirement Savings Contributions, to determine your credit rate.
The maximum contribution taken into account is $2,000 per person. On a joint return, up to $2,000 is taken into account for each spouse.
Figure the credit on Form 8880. Report the credit on line 51 of your Form 1040 or line 32 of your Form 1040A, and attach Form 8880 to your return.
previous pagePrevious Page: Publication 571 - Tax-Sheltered Annuity Plans (403(b) Plans) - Worksheets
next pageNext Page: Publication 571 - Tax-Sheltered Annuity Plans (403(b) Plans) - How To Get Tax Help
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication