Form 8880

Forum|Forum|5 years ago
March 19, 2021
1 reply
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I'm stumped. I believe I am entitled to claim a savings credit on Form 8880. Turbotax says I do not qualify. There is no worksheet to review or analyze in Turbotax. On the IRS website, the retirement savings calculator indicates I am entitled to the credit. I think I meet the basic qualifications (over 18, not a student, not a dependent). I made a 2020 contribution to my Roth IRA. The amount of the contribution exceeds the distributions taken in the last 2 years (by my wife, we file a joint return). I have taxable income (line 18, 1040) which exceeds the amount of the credit I am estimating to be received. I have taken a look at many posts on this topic and the normal replies ( --no taxable income -- tax due is all Sch SE self employment tax-- distributions taken in prior years exceeds contribution amount) don't seem to apply to my situation. Normally I can dig into the worksheets and figure out a data entry error but no worksheet when the software indicates you do not qualify. Anyone have any thoughts?

TurboTax Self Employed Online

dmertz

Level 15

The calculations are done on Form 8880 itself, but if the resulting credit is zero, TurboTax doesn't include Form 8880 in your tax file. Because this credit is a nonrefundable credit, you don't get any benefit from the credit if your income tax liability is already zero without this credit. This credit cannot be used to reduce self-employment taxes. Because this credit is meant to benefit those with lower incomes, it's common that those otherwise eligible for the credit have no income tax liability against which to apply the credit.

jhill66Author

Level 2

Thanks for the reply and comment. I was aware that you need to have a tax liability (other than self employment taxes) as that has been commented on in previous threads. I do have a tax liability (line 18 on the 1040) greater than the savings credit amount (as I manually calculate it). I wonder if it has to do with the order that credits are applied? Do refundable credits get applied first, before nonrefundable? I did not receive one of the stimulus payments, so I have a refundable recovery rebate credit which, if applied first, would eliminate my tax liability...and then maybe that is why there in no savings credit??

dmertz

Level 15

Certain other nonrefundable credits are indeed applied first, those present on Schedule 3 lines 1 through 3 and Schedule R line 22. If these other credits by themselves are sufficient to reduce your income tax liability to zero, you don't get any Retirement Savings Contributions Credit.

Refundable credits are applied after and are not affected by nonrefundable credits.

For example, someone over age 65 who has an AGI of more than $12,000 but less than $15,525 will get the tax Credit for the Elderly and Disabled on Schedule R first, reducing income tax liability to zero before the application of any Retirement Savings Contributions Credit for which they might otherwise be eligible.