What this line means
Distributions you received from retirement accounts or ABLE accounts during a specific look-back period. 1 The IRS subtracts these distributions from your total contributions to prevent filers from gaming the credit — contributing money, claiming the credit, then immediately withdrawing it. The look-back period covers the tax year, the two prior years, and the period after the tax year up to the due date of your return (including extensions).
Does this apply to you?
- You took a distribution from an IRA, 401(k), 403(b), 457(b), or other employer plan during the look-back period
- You received a distribution from an ABLE account during the look-back period
- You are calculating your net eligible contributions for the Saver’s Credit
Easy to overlook
The look-back window extends beyond the current tax year Distributions from the two prior tax years and from the period between January 1 and the filing deadline (including extensions) of the current year all count. 2 A filer who took a $3,000 hardship withdrawal two years ago and forgot about it will have that amount reduce their eligible contributions on this line. IRS Form 8880 instructions — line 5 certain distributions
Rollovers between eligible plans are excluded A direct trustee-to-trustee rollover from one IRA to another or from a 401(k) to an IRA does not count as a distribution for line 5. 3 Only distributions paid to you (or that you did not roll over within 60 days) reduce your contributions. If you did a proper rollover, do not include it here. IRC Section 25B(d) — reduction for distributions
Watch out for this
Forgetting distributions from two or three years ago. The IRS matches Form 1099-R data across multiple years. If you took $1,500 from your IRA two years ago, that distribution reduces your line 5 amount today. Check your records for any retirement account distributions during the entire look-back period, not only the current tax year.
Footnotes
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IRS Form 8880 Instructions, Line 5. https://www.irs.gov/instructions/i8880 ↩
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IRS Form 8880 Instructions, Certain Distributions. https://www.irs.gov/instructions/i8880 ↩
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IRC Section 25B(d), Reduction for Certain Distributions. https://www.law.cornell.edu/uscode/text/26/25B ↩