How to Write a Form 8880 Credit: Are You Eligible for One?

How to Write Form 8880

Before discussing the different steps needed in the form, let’s talk about what Form 8880 from the IRS is. 

In a nutshell, this form reports your contributions to your retirement savings accounts. The IRS encourages low-income earners to contribute to this savings account by giving them a tax credit. 

By getting a tax credit, the tax you owe can be directly reduced. On the other hand, if you are getting a deduction, your taxable income only gets decreased. If you need to claim the retirement savings credit that you paid for, you will need to customize Form 8880. 

Here are the steps you need to write Form 8880:

1. Identify if you are eligible for the saver’s credit

The first thing you need to do is check if you are eligible for this tax credit. The retirement plans that are eligible for the saver’s credit include the following:

• Individual retirement accounts (IRAs)
• Employer-sponsored plans (example: 401(k)s)
• Achieving a Better Life (ABLE) accounts

If you are making a contribution to any of these accounts, you can start drafting the form. The credit also requires you to be at least 18 years old. 

2. Submit Form 1040 together with Form 8880

You’ll also need to prepare Form 1040 to file your tax return. Once you have completed both forms, make sure that you submit them to the IRS together.

3. Print out Form 8880

The process of Form 8880 creation starts by printing out a copy of the form. You will then need to complete the form with the necessary information. Once this is taken care of, you can mail it to the IRS. 

One good thing about filing your taxes electronically is that you can complete this process online. All you need to do is follow the prompts so you can customize it with the right information. 

4. Know how the calculation works

If you are planning to complete the form manually, it’s important that you know how the calculation works. Even though this form only contains one page, it will require specific information. 

You will need to include how much you’ve been contributing for the year. Make sure to check your traditional IRA, Roth IRA, and ABLE accounts. These should not include the rollover amounts. 

After that, you have to prepare your adjusted gross income (AGI) so you can determine your credit percentage. The saver’s credit you are eligible for will be a percentage of the following:

• Traditional or Roth IRA contributions
• Voluntary after-tax employee contributions on a qualified retirement plan
• Elective salary deferral contribution
• ABLE account contribution
• 501(c)(18)(D) plan contributions

If you are single, the maximum credit you qualify for is $1,000. But if you are married, the maximum credit is $2,000.