3 replies

  1. Thank you…. I just saved myself $858 on my taxes by filing form 8880. I have paid into a traditional IRA for the last 20 years. I plan to go back the 3 years (1040X) and file an 8880 for those years too. In looking back at my previous forms I have a possible $1000 coming back. Thank you so much for letting us know about this. I so appreciate you Tom Copeland.

  2. I’m missing something on the math here. You put $350 into a retirement account (traditional IRA in this example) and the tax benefits add $650. Even in the 50% Saver’s Credit bracket you only get $175. If your income is that low your income tax bracket is also low or zero. Even at a 15% tax bracket the the $350 IRA contribution is only worth $52.50. Where does the other $422.50 come from?

    I love the Saver’s Credit, but in such a low tax bracket a Roth IRA might be worth more. $350 put in a Roth IRA (still qualifies for the Saver’s Credit) will turn into around $2,800 in 30 years if you invest in an index fund. Still, the upfront tax savings will be small ($175).

    Can you help me with the math? I am a tax professional and want to make sure I am not missing anything. Always open to learning.

    • In my example a provider contributed $1,000 to an IRA, got the two tax breaks totally $650. Therefore, she paid $1,000, reduced her taxes by $650 and ended up only paying $350. You are correct that over the long run the Roth IRA is a better deal.

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