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taxmap/pubs/p590-027.htm#en_us_publink1000231188

Chapter 5
Retirement Savings Contributions Credit  
(Saver's Credit)(p77)

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What's New for 2009(p77)


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taxmap/pubs/p590-027.htm#en_us_publink1000231190

Modified AGI limit for retirement savings contributions credit increased.(p77)

For 2009, you may be able to claim the retirement savings contributions credit if your modified AGI is not more than:

taxmap/pubs/p590-027.htm#TXMP332fd9c8Introduction

You may be able to take a tax credit if you make eligible contributions (defined later) to a qualified retirement plan, an eligible deferred compensation plan, or an individual retirement arrangement (IRA). 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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taxmap/pubs/p590-027.htm#en_us_publink1000231191

Can you claim the credit?(p77)


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If you make eligible contributions to a qualified retirement plan, an eligible deferred compensation plan, or an IRA, you can claim the credit if all of the following apply.
  1. You were born before January 2, 1992.
  2. You are not a full-time student (explained below).
  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. $55,500 if your filing status is married filing jointly,
    2. $41,625 if your filing status is head of household, or
    3. $27,750 if your filing status is single, married filing separately, or qualifying widow(er).
taxmap/pubs/p590-027.htm#en_us_publink1000231194

Full-time student.(p77)
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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.
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Adjusted gross income.(p77)
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This is generally the amount on line 38 of your 2009 Form 1040; line 22 of your 2009 Form 1040A; or line 36 of your 2009 Form 1040NR. However, you must add to that amount any exclusion or deduction claimed for the year for:
taxmap/pubs/p590-027.htm#en_us_publink1000231196

Eligible contributions.(p77)


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These include:
  1. Contributions to a traditional or Roth IRA,
  2. Salary reduction contributions (elective deferrals, including amounts designated as after-tax Roth contributions) 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 governmental 457 plan),
    4. A SIMPLE IRA plan, or
    5. A salary reduction SEP, and
  3. Contributions to a section 501(c)(18) plan.
They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or section 403(b) annuity. For purposes of the credit, an employee contribution will be voluntary as long as it is not required as a condition of employment.
taxmap/pubs/p590-027.htm#en_us_publink1000231197

Reducing eligible contributions.(p77)


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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 included above under Eligible contributions. Also 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 of the following.
  1. The portion of any distribution which is not includible in income because it is a trustee-to-trustee transfer or a rollover distribution.
  2. 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.
  3. Loans from a qualified employer plan treated as a distribution.
  4. Distributions of excess contributions or deferrals (and income attributable to excess contributions and deferrals).
  5. Distributions of dividends paid on stock held by an employee stock ownership plan under section 404(k).
  6. Distributions from an eligible retirement plan that are converted or rolled over to a Roth IRA.
  7. Distributions from a military retirement plan.
taxmap/pubs/p590-027.htm#en_us_publink1000231199

Distributions received by spouse.(p78)
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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.
taxmap/pubs/p590-027.htm#en_us_publink1000231200

Testing period.(p78)
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The testing period consists of the year for which you claim the credit, the period after the end of that year and before the due date (including extensions) for filing your return for that year, and the 2 tax years before that year.
taxmap/pubs/p590-027.htm#en_us_publink1000231201

Example.(p78)

You and your spouse filed joint returns in 2007 and 2008, and plan to do so in 2009 and 2010. You received a taxable distribution from a qualified plan in 2007 and a taxable distribution from an eligible deferred compensation plan in 2008. Your spouse received taxable distributions from a Roth IRA in 2009 and tax-free distributions from a Roth IRA in 2010 before April 15. You made eligible contributions to an IRA in 2009 and you otherwise qualify for this credit. You must reduce the amount of your qualifying contributions in 2009 by the total of the distributions you received in 2007, 2008, 2009, and 2010.
taxmap/pubs/p590-027.htm#en_us_publink1000231202

Maximum eligible contributions.(p78)


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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/p590-027.htm#en_us_publink1000231203

Effect on other credits.(p78)


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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 refundable amount of your child tax credit, is an amount that you would receive as a refund even if you did not otherwise owe any taxes.
taxmap/pubs/p590-027.htm#en_us_publink1000231204

Maximum credit.(p78)


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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 Hope credit, then you will not be entitled to this credit.
taxmap/pubs/p590-027.htm#en_us_publink1000231205

How to figure and report the credit.(p78)


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The amount of the credit you can get is based on the contributions you make and your credit rate. Your 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 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 50 of your Form 1040; line 32 of your Form 1040A; or line 46 of your Form 1040NR and attach Form 8880 to your return.