What this line means
The sum of your IRA contributions (line 1), elective deferrals (line 2), and ABLE account contributions (line 3). 1 This is your total qualifying retirement and disability savings for the year before any adjustment for distributions. Each spouse calculates their own total in separate columns. This number represents the full pool of savings the IRS uses to calculate your Saver’s Credit.
Does this apply to you?
- You entered amounts on lines 1, 2, or 3 of Form 8880
- You contributed to any combination of IRAs, employer plans, or ABLE accounts during the tax year
- You are determining your total eligible savings before subtracting distributions
Easy to overlook
Contributions to multiple account types all stack together If you put $2,000 into a Roth IRA and $3,000 into a 401(k), your total on line 4 is $5,000. 2 Some filers only report one type of contribution, forgetting that the Saver’s Credit looks at all qualifying savings combined. The higher your total contributions, the larger the potential credit (up to the annual cap). IRS Form 8880 instructions — line 4 total contributions
The credit is capped at contributions of $2,000 per person Your total contributions feed into line 6 (after subtracting distributions), but the credit calculation on line 10 caps the eligible amount at $2,000 per filer ($4,000 for a married couple filing jointly). 3 Even if line 4 shows $10,000, the maximum credit base is $2,000 per person. IRC Section 25B — elective deferrals and IRA contributions credit
Watch out for this
Double-counting contributions that appear on multiple tax documents. Your 401(k) deferral shows on your W-2 and on your plan statement. Your IRA contribution shows on Form 5498 and in your own records. Use one authoritative source for each account type and verify that the total on line 4 does not include the same dollars twice.
Footnotes
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IRS Form 8880 Instructions, Line 4. https://www.irs.gov/instructions/i8880 ↩
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IRS Form 8880 Instructions, Total Contributions. https://www.irs.gov/instructions/i8880 ↩
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IRC Section 25B, Credit for Qualified Retirement Savings Contributions. https://www.law.cornell.edu/uscode/text/26/25B ↩