Why does my rollover IRA count against my "Retirement Savings Contribution Credit"? (form 8880)

[gabeybarber]

The amount of my credit was reduced because of this distribution, even though it went straight into another IRA.

[AndreaG · Accepted solution]

According to the IRS instructions, rollover contributions are NOT considered eligible contributions. At the time that you made the original contribution, it would have been an eligible contribution so it would be like using the same contribution twice for this credit. Please refer to line 1 of page 1 of the IRS instructions. https://www.irs.gov/pub/irs-pdf/f8880.pdf

However, with respect to your contributions that are eligible for this credit on your 2016 tax return, they are NOT reduced by the amount of this same rollover distribution. Please refer to page 48 of Pub 590A under the heading, "reducing eligible contributions" where it says, "do not reduce your eligible contributions by any of the following...." https://www.irs.gov/pub/irs-pdf/p590a.pdf

[gabeybarber]

Thank you. I must have entered something incorrectly, I'll go back through it.

[AndreaG]

You might have entered everything correctly. You have two things going on. You have a rollover distribution from one IRA and then it's also a rollover contribution in that you put it into a different IRA. As long as you dont see this amount included in your total eligible contributions (line 1 of form 8880) and you dont see it included in your total distributions(line 4 of form 8880) then you did it right. The form number that you want to look at in Turbo Tax is Form 8880.