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Author: Patzer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: Re: Roth IRA/Savings Bond Date: 4/14/2011 4:44 PM
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The retirement savings contribution credit is $1000/person. So $2000 if filing jointly.

http://www.irs.gov/newsroom/article/0,,id=107686,00.html

For the tax pros, can a couple file jointly but only one IRA account be funded?


Not a pro, but I've looked at the retirement savings credit as a VITA volunteer. The retirement account doesn't have to be an IRA; I see credits driven by 401(k) or 403(b) contributions fairly often.

Yes, you can get a retirement savings credit on a joint return even if only one spouse funds a retirement account. However, if I follow the logic on Form 8880 I come out to a maximum credit of $1000 if only one spouse funds an account. Contributions used for the credit are capped at $2000 for each spouse, and the maximum credit multiplier is 0.5.

In any event, the $2000 retirement savings credit isn't going to happen on a normal return. In order to get to a $2000 credit on Form 8880, you need a joint return with $33,500 AGI or less, and each spouse contributing at least $2000 to a retirement account. (Above $33,500 AGI, the multiplier drops to 0.2.)

$33,500 AGI, less $11,400 standard deduction and $7,300 for two exemptions comes down to a taxable income of $14,800. Tax on $14,800 MFJ taxable income is only $1,478 per the tax tables. The retirement savings credit is non-refundable, and thus limited to the amount of the taxpayer's tax liability. It looks to me like the actual maximum retirement savings credit on a 2010 return would be $1,478.

The tax code is complex, so I can't rule out some theoretically possible scenario where more than $1,478 could come through; but I don't expect to see such a return.

Patzer
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