Will we be able to claim savers credit

[Mike92ct]

We file married joint. My wife will receive a w2 for about 60K (60K taxable income- says her final 2022 paystub)

I started my own business this year and will have losses after equipment purchases and a hefty truck deprecation, among other deductions.. in turn will reduce her AGI..

I read on the IRS website, married, joint, with a AGI of $41K or less can receive a 50% credit on any IRA contributions- up to $2,000 credit (with a $4K max contribution.. for the credit..).  

It appears the IRA limit per person is $6K a a year. Our IRA is only in my name (my wife has a 401 but not including) - If I have already, or meet/exceed $4K in just my IRA, will that qualify for a $2K credit? and does it need to be done by dec 31st? Or like other retirement accounts, do I have a bit longer?? 

Almost seems too good to be true??

[Hal_Al]

The Credit is for Qualified Retirement Savings Contributions, not just having $4000 in your IRA.  You have until April 18, 2023 to make qualified contribution for tax year 2022. 

If you made a $4000 IRA contribution, earlier in 2022, that counts for the credit. Edited, per dmertz's reply: $2000 is the limit for each spouse. You would have to contribute $2000 to your IRA and $2000 to your spouse's 401k (or IRA) to get the maximum credit .  See line 6 of form 8880. 

The Retirement Savings Contributions Credit (“Saver’s credit”) is very limited and is for low income people. See the table on  Form 8880: https://www.irs.gov/pub/irs-pdf/f8880.pdf

You, or your spouse, must  not have taken money out of a retirement account  in the last three years. See line 2 on form 8880.

It is not a refundable credit. You must have a tax liability to take the credit against.

[Mike92ct]

Thank you. 

Happy holidays 

We have never taken a withdrawal. And I should have made that more clear, my reference to contributions was FOR the tax year 2022. If I make sure I have 2022 contributions of $4k or more... then thats a contribution?? And I don't see anything about low-income but rather just a AGI of a certain amount, which by my deductions should bring us below the number mentioned. 

And a non refundable credit.. I don't believe my business expenses/deductions, will bring us to Zero... just a refund on what my wife has already paid. So, a nonrefundable credit would still offset any remaining amount due??

[fanfare]

68.000 AGI on a joint return is the cutoff.

your tax refund has nothing to do with it.

[Hal_Al]

Q. So, a nonrefundable credit would still offset any remaining amount due?

A. Yes.  It would reduce your calculated tax.  

Using an example: at an AGI of $41,000, your calculated tax would be $1510.  Your savers credit would be $1510 (not the full $2000 calculated on the $4000 contributions).  So your net calculated tax is 0.  All your spouse's withholding would be refunded. 

[NCperson]

@Mike92ct - the tax on Line 18 of Form 1040 is the critical line item.  Any non-refundable credit can reduce this line but to no lower than zero.  So if Line 18 is $1510, then the limit of the Savers credit is $1510.  if you have other non-redundable credits, the sum of all of them can be used to reduce Line 18, but again, to no lower than zero.   

[Mike92ct]

Thanks. I understand now. Especially with that example using the $41k.  

Thanks everyone. 

[dmertz]

Slight correction ot Hal Al's reply.  Only the first $2,000 of an individual's retirement contributions is considered for the credit (line 6 of Form 8880).  If your AGI is not over $41,000, with a $4,000 contribution to just your IRA the credit would be  50% of $2,000 which is $1,000, not 50% of $4,000.  To get to a total credit of $1,510, your spouse would have to contribute at least $1,020, to your spouse's retirement account; 50% of $1,050 is $510.