25.16 Figuring the Saver’s Credit

You figure your saver’s credit on Form 8880.

The maximum credit equals the applicable income-dependent rate shown in Table 25-2 (50%, 20%, or 10%) multiplied by the first $2,000 of eligible retirement contributions made for 2012. If you are married filing jointly, you and your spouse may each take into account up to $2,000 of eligible contributions. Eligible contributions include: (1) traditional IRA or Roth IRA contributions, (2) salary-reduction contributions to a 401(k) plan (including a SIMPLE 401(k)), 403(b) plan, SIMPLE IRA, governmental Section 457 plan, or salary-reduction SEP, or (3) voluntary after-tax contributions to a qualified plan or 403(b) plan.

Withdrawals can eliminate the credit.

A credit can be lost because you have withdrawn money from a retirement plan. In figuring a credit for 2012, your eligible contributions for 2012 must be reduced by the total of distributions you received (and also your spouse if filing jointly) after 2009 and before the due date of your 2012 return (including extensions) from traditional IRAs and Roth IRAs, 401(k) plans, SEPs, SIMPLE plans, 403(b) plans, and other qualified retirement plans. Do not count tax-free rollovers, direct transfers (trustee-to-trustee), conversions of a traditional IRA to a Roth IRA, distributions of excess contributions or deferrals, or returned contributions; see the instructions to Form 8880.

Tax liability limit.

The credit is not refundable. It is limited to your tax liability (regular tax plus AMT, if any), reduced by certain other nonrefundable credits such as the child tax credit, the dependent care credit or the American Opportunity or Lifetime Learning credits.