Eligibility for Retirement Savings Contribution Credit

[jwallace83]

Why would I not be eligible for Retirement Savings Contribution Credit?

- Married, filing jointly

- Not a student

- Made $7k into each of our Roth IRAs

- Added 1,965.71 to 457b plan with current employer

- We qualify based on the AGI limits for full amount

We did have pension income of 24,344. Do pensions count against the retirement savings contributions?

Is there any way to qualify for this credit?

[Hal_Al · Accepted solution]

Yes, pension distributions (including regular monthly payments) count against the retirement savings credit. 

See line 4 on form 8880.

https://www.irs.gov/pub/irs-pdf/f8880.pdf

Q. Is there any way to qualify for this credit?

A. No. The pension is a disqualifier. 

[SweetieJean]

Right. The purpose of the Credit is to encourage folks to save for their retirement, but you are already drawing retirement benefits.

[jwallace83]

Thanks for your help! We thought with such low AGI, we might qualify, but did not think the pension counted against the number. Oh well....

[Infinite]

All of the above apply, except that in 2018 I took a distribution.  The entire distribution was rolled into a ROTH IRA.  Why is Turbo Tax showing this as a distribution?  

[dmertz]

Infinite, in the Retirement Savings Contributions Section where it asks you to enter distributions that you made after 2017 and before the due date of your tax return you were instructed not to include any amounts rolled over or converted to Roth.  Go back and correct any incorrect entry you made there.

[Hal_Al]

Because you told TT it was a distribution.  A rollover or a Roth conversion is not a distribution.  

From the instructions for form 8880:

Line 4; Don’t include any of the following.
• Distributions not taxable as the result of a rollover or a trustee-to trustee transfer.
• Distributions that are taxable as the result of an in-plan rollover to your
designated Roth account.
• Distributions from your eligible retirement plan (other than a Roth IRA)
rolled over or converted to your Roth IRA.

[messman62]

So if you didn't have the pension income you would have qualified for the credit?

[DawnC]

Yes, pension income offsets the RSCC - or Saver's credit.   

Depending on your adjusted gross income and tax filing status, you can claim the credit for 50%, 20% or 10% of the first $2,000 you contribute during the year to a retirement account. Therefore, the maximum credit amounts that can be claimed are $1,000, $400 or $200.

• The biggest credit amount a married couple filing jointly can claim together is $2,000.
• But, if you and/or your spouse took a taxable distribution from your retirement account during the two years prior to the due date for filing your return (including extensions), that distribution reduces the size of the Savers Credit available to you.
• The Savers Credit is a 'non-refundable' tax credit. That means this credit can reduce the tax you owe to zero, but it can't provide you with a tax refund.