Know about IRS Tax Form 8880
IRS is always working on encouraging individuals with lower wages to add to their savings plans for pensions. The Internal Revenue Service (IRS) has initiated providing them with a tax credit for donations. A tax credit decreases the amount of tax that they owe, as opposed to a deduction that simply lowers your taxable income. You must use IRS Form 8880 to claim the retirement savings credit. We are going to see all details about the IRS tax form 8880.
Eligible Retirement Plans
Contributions you make to any eligible pension fund will be used to meet the eligibility criteria of the credit. Traditional IRAs, 401(k) plans, Roth IRAs, 403(b) plans, and 457 plans include eligible retirement plans. The maximum credit for a single taxpayer in the fiscal year 2019 is $1,000, and it rises to $2,000 for joint filers.
For the Eligible Retirement Savings Account Credit, taxpayers use IRS Form 8880. The saver’s credit is also called the Eligible Retirement Savings Contribution Credit. The credit is available alone to taxpayers with a cumulative income of $32,000 as of 2019.
AGI Limitations
For your filing status, your Adjusted Gross Income (AGI) must fall below the income limits. For 2019, alone filers with an AGI of $32,000 or head of household filers with AGI of $48,000 or more or Joint AGI filers of $64,000 or more are not eligible to claim the credit.
Such limits will adjust for inflation every year. In addition to meeting the AGI requirements, you must be at least 18 years of age, not enrolled at any point during the tax year as a full-time student, and you should not be listed as dependent on the tax return of another.
Calculation
Your Form 8880 will lead you through a calculation to calculate the maximum amount of credit you qualify to claim. The volume of your tax credit is a percentage of your annual contributions to your pension account, which can range from 10 to 50 percent. Yet, as the AGI increases, the credit percentage decreases.
One thing to take notice is that even though you claim a deduction on the same IRA donations, you can still claim the credit. So, to assess your eligibility, TurboTax will ask you basic questions and will do those calculations for you.
Preparation of Form 8880
You can fill out the IRS form 8880 and include it with your tax return to claim the credit. You need information before you prepare Form 8880. The information includes AGI that you calculate should be on your income tax return, and the paperwork should be showing your total annual pension plan contributions. You can file Form 8880 with Forms 1040 or 1040NR using IRS.
Conclusion
Form 8880 displays the balance of your retirement savings credit contributions (also known as the saver’s allowance) if any. In addition to any IRA deduction reported under Schedule 1 (Form 1040 or 1040-SR), line 19, or Form 1040-NR, line 32, this credit may also be reported.
