Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Miscellaneous Credits

Retirement Savings Contributions Credit

Factors that Reduce the Eligible Contribution

Even if taxpayers qualify for the credit, their eligible contributions will be reduced by certain distributions received during the "testing period." The testing period includes:

  • The tax year
  • The two preceding tax years, and
  • The period between the end of the tax year and the due date of the return, including extensions

The types of distributions that reduce the eligible contributions include any distribution:

  • Traditional or Roth IRAs.
  • 401(k), 403(b), governmental 457, 501(c)(18)(D), SEP, or SIMPLE plans.
  • Qualified retirement plans as defined in section 4974(c) (including the federal Thrift Savings Plan).

For married taxpayers filing a joint return, both spouses may be eligible for a credit on a maximum annual contribution amount of $2,000 each. If either spouse has a distribution during the testing period, both spouses must reduce their eligible contribution by that amount.

Tip

Question the taxpayer to determine if there have been any distributions in the testing period. Do not include distributions that were not taxable because they were rolled over or transferred to another qualified plan. See Publication 4012, Credits tab, for additional exceptions that do not need to be included in total distributions.

Three calendars for years 2011, 2012, 2013; labeled Testing Period.