TT says "Based on your income and filing status, you can claim Retirement Savings Contrib Credit." Age, School, AGI, IRA all good how do I determine why I don't qualify?

[DavidS127]

If line 4 of Schedule 3, Part I does not have an amount, check your situation versus the IRS qualifications for the 2019 Retirement Savings Contribution Credit at this link:

You're eligible for the credit if you're:

1. Age 18 or older;
2. Not a full-time student; and
3. Not claimed as a dependent on another person’s return.

[sailingmagnus]

How can you see Line 4 of Schedule 3 in TT, before I  file my taxes?

I'm Over 18, Not a Student, Not A dependent

Married Filing Jointly with an AGI of $40K so I expect a 20% contribution credit but it doesn't happen and I can't determine why.   Could it be my investment income?  K1's?  This is my first year of retirement so my AGI was huge last year vs this year.  This year only had about $11K of 1099 consulting income the rest investment income.  I wanted to make IRA contribution to reduce 1099 income and claim Retirement Savings Credit of 20% based on meeting the criteria for $40K AGI....

[DoninGA]

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@sailingmagnus wrote:

How can you see Line 4 of Schedule 3 in TT, before I  file my taxes?

I'm Over 18, Not a Student, Not A dependent

Married Filing Jointly with an AGI of $40K so I expect a 20% contribution credit but it doesn't happen and I can't determine why.   Could it be my investment income?  K1's?  This is my first year of retirement so my AGI was huge last year vs this year.  This year only had about $11K of 1099 consulting income the rest investment income.  I wanted to make IRA contribution to reduce 1099 income and claim Retirement Savings Credit of 20% based on meeting the criteria for $40K AGI....

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Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.

[dmertz]

Since this is a nonrefundable credit, there is one more requirement:  Your income tax liability must not already be zero, otherwise there is nothing against which to apply the credit and you don't get the credit.  This credit cannot be used to reduce Other taxes like self-employment tax or an retirement-account early-distribution penalty.

If your tax liability is reduced to zero by other nonrefundable credits, ones that can be carried forward to next year, you might see the application of the Retirement Savings Contributions Credit increasing the carryforward of these other credits while keeping your tax liability at zero, making it look like the Retirement Savings Contributions Credit is not having any effect when it actually is.

[sailingmagnus]

These steps were SPOT ON!    Thanks.....so in looking at Schedule 3 line 4 the entry is zero.   Referring back to the requirements for the Contribution Credit I appear to meet them and the IRS references Form 8880.    Form 8880 says you have 1040 line 8b (mine $37,680) has to be in the ranges for the credit.  In our case Married Filing Jointly and much to my surprise my credit should 50% of my contribution not 20%.   So before electing to contribute to my IRA we owed $532 based on my 1099 income of about $11K, plus dividends and cap gains.    I then run the numbers again with my IRA contribution at $1K and my tax liability drops by 12%/$120 to $412.....

      AH the light bulb just lite up over my head!   Since my line 8b is $37,680 not the AGI of about $40K that I thought it was my credit is $500 not $200, which is greater than my tax liability of $412 so I don't qualify.   Thank you thank thank you.   By seeing the numbers on the actual 1040 form I was able to figure this out.

[sailingmagnus]

As a final thought/note to update/close out this thread..... my epiphany of what was wrong didn't pan out and I gave up.   IF I was right that my credit exceeded tax due than cutting my IRA contribution in half should have been the magic.  I tried that and TT still said I didn't qualify for the credit.   I was spending hours trying to save a few bucks and finally decided my time was worth way more than the loss of me paying the IRS.  I don't mind doing my part so I just paid all the taxes due and skipped the IRA contribution and retirement credit.  Thanks for all the replies/eyes......

[dmertz]

You mentioned 1099 income.  If that includes Forms 1099-R reporting distributions from qualified retirement accounts (401(k), IRA, etc.), those distributions made within the period beginning two years prior to the beginning of the year for which you are filing through the due date of this tax return that are not rolled over or converted to Roth are subtracted from the amount of your contributions for the tax year and only the net amount is considered when calculating the credit.

[sailingmagnus]

Thanks for the additional feedback but my income is 1099-Misc.  I probably should have been paying taxes quarterly but I was not seriously working only helping some of my old customers by doing some freelance consulting work.    I do have 1099-DIV also from my my investments but no 1099-R.    Didn't do any rollovers, re-characterizations, or early distributions from my retirement funds.  IMO it's a bug in TT as I'm 99% sure that I qualified for RSCC but got tired fighting trying to figure it out....