Retirement Credit

Today TaxMama hears from Cindy in Kansas with an enterprising idea. “I understand that enrolling in an IRA gives an additional tax credit; I have not done so as of yet. Would rolling over a 401(k) account into a Roth IRA be eligible?”

Dear Cindy,

The purpose of the retirement credit is to encourage new contributions to retirement accounts. Unfortunately, rollovers won’t give you any credits.
See the instructions for Form 8880 – http://www.irs.gov/pub/irs-pdf/f8880.pdf

Besides, hardly anyone I know seems to qualify for this credit. It’s designed to encourage retirement savings by lower-income individuals. So you won’t qualify if your income is higher than $26,000 ($39,000 if head of household; $52,000 if married filing jointly).

I test this credit on every tax return I do. Most of my clients’ incomes are too high. Those whose incomes are low enough to qualify, either don’t have any taxes due – or are too old to make contributions. So they’d get no benefit from the credit.

One enrolled agent I know says he’s quite successful in getting this credit for his clients. So, be sure to check if you can get some benefit from the retirement contribution.

And remember, you can find answers to all kinds of questions about retirement credits and other tax issues, free. Where? Where else? At TaxMama.com

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