IRS form 8880 Credit for Retirement Savings Contributions?
Wednesday, March 31st, 2010 at
10:03 pm
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Filed under: Retirement Planning
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"Internal Revenue Code (IRC) Section 25B provides a nonrefundable tax credit for an eligible individual who makes a regular traditional IRA or Roth IRA contribution or defers a portion of his/her salary to a qualified employer plan. An individual or married couple files IRS Form 8880 to take advantage of the credit, which is only available through 2006.
An individual bases the credit calculation on a percentage of his/her regular IRA contribution and/or salary deferral up to $2,000 each year. The credit ranges from 10 percent to 50 percent of the IRA contributions and/or salary deferrals depending on an individual’s adjusted gross income.
As a nonrefundable credit, it is only available to the extent of an individual’s income tax. In other words, if an individual determines that he is entitled to a $1,000 credit but only owes a tax of $500, the credit will zero out his tax, but the remaining $500 of credit is lost.
Furthermore, the credit is not available to any full-time student, any individual claimed as a dependent on another person’s federal income tax return, or to any individual with adjusted gross income over $25,000 ($37,500 for an individual filing as a head of household and $50,000 for a married couple filing a joint return)."
prior poster nailed it on the head…it’s an incentive to save…but only for lower income individuals. I would imagine that H&R Block SOFTWARE would not allow you to take the credit but H&R Block individuals who are misinterpreting the law are.