Savers Credit and Roth Conversions
Hello-
Client made a direct Roth contribution and did an IRA to Roth conversion in same year. They were told they couldn’t take the Saver’s Credit due to the Roth Conversion and I am questioning if that is accurate.
On the form 8880, there is an add-back for certain distributions but in the instructions, it says to not include “Distributions from your eligible retirement plan (other than a Roth IRA) rolled over or converted to your Roth IRA.”
Does that mean the IRA to Roth conversion would not by itself disallow the Saver’s Credit?
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2024-02-26 21:30
You are correct. Conversions do not reduce contributions and therefore are not included on line 4 of Form 8880. However, conversions add to AGI so will affect both the tax subject to credit and will increase AGI which could reduce or eliminate the credit %.
Permalink Submitted by IRAQuestion5 on Mon, 2024-02-26 22:16
Perfect. Thank you!