What Is the IRS Form 8880?

Updated for Tax Year 2019


OVERVIEW

Are you eligible for the Saver's Credit? IRS Form 8880 will help you determine if you are eligible this credit for retirement savings. Here are the details.


Introduction

To encourage people with lower incomes to contribute to their retirement savings accounts, the Internal Revenue Service offers a tax credit for contributions to them. A tax credit directly reduces the amount of tax you owe, unlike a deduction, which only decreases your taxable income. In order to claim the retirement savings credit, you must use IRS form 8880.

Eligible retirement plans

Contributions you make to any qualified retirement plan can be used to satisfy the credit’s eligibility requirements. Qualified retirement plans include traditional IRAs, Roth IRAs, 401(k) plans, 403(b) plans and 457 plans. In the 2019 tax year, the maximum credit available to a single taxpayer is $1,000 and for joint filers, it increases to $2,000.

AGI limitations

Your Adjusted Gross Income (AGI) must fall below the income limits for your filing status. For 2019, single filers with an AGI of $32,000 or more, head of household filers with AGI of $48,000 or more and joint filers with an AGI of $64,000 or more are ineligible to claim the credit.

These limits can change each year for inflation. In addition to satisfying the AGI limitations, you must be at least 18 years old, not enrolled as a full-time student at any time during the tax year and you cannot be claimed as a dependent on another person's tax return.

Calculating your eligible credit

Your Form 8880 will guide you through a calculation to determine the maximum credit amount you are eligible to claim. The size of your tax credit is a percentage of your annual retirement account contributions, which can range from 10 to 50 percent.

However, the credit percentage decreases as your AGI increases. For example, for 2019, a single taxpayer with an AGI of $16,750 can claim a credit equal to 50 percent of her IRA contributions; whereas, a similar taxpayer with an AGI of $27,000 calculates the credit as only 10 percent of annual contributions. One thing to remember is that you can still claim the credit even if you claim a deduction for those same IRA contributions.

TurboTax will ask you simple questions to determine your eligibility and will do these calculations for you.

Preparing Form 8880

To claim the credit, you must complete IRS form 8880 and include it with your tax return. Two key pieces of information you need before preparing Form 8880 is the AGI you calculate on your income tax return and documentation that reports your total retirement account contributions for the year. The IRS allows you to file Form 8880 with Forms 1040 or 1040NR (1040NR not supported in TurboTax).

Again, when you use TurboTax to complete your tax return, we’ll fill in all the right forms for you.

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