Retirement Contribution Credit Question

[MustardTiger]

Hello,

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

Based on this chart, it looks like I should be getting a decent sized credit.  What's going on?

If I look on my income inputed to turbotax, after inputing my w2 and my wife's 1099 income, it adds up to ~43,000.  I assume this is my AGI?

Due to the sell of our house this year, we were able to put more into our retirement accounts.  12k in my 403b, 6k in my 457b, 2k in my wife's i401k, as well as maxing both of our roth ira's.  According to the chart, we should get a 10% credit up to 2000, which we are over.

However, when I went through the tax credit questions in turbotax, it tells me I get a credit of 136$.  Last year I got around 1200 for this with more income and less retirement contributions.  Is there something I am missing here?

[terran]

AGI is actually income after deductions like traditional 403b/457/401k contributions (also health insurance, HSA contributions, half of self employment tax, etc), so your AGI is probably even a bit less. See https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-adjusted-gross-income-agi/L2C6rCEit. Either way, yes, you're correct that should put you each in the 10% on $2000/person of retirement contributions, so you should be getting a $400 credit.

The credit is non-refundable, so if for some reason your total tax liability is only $136, that would explain what's going on. Do you have kids causing an exemption or some other credit?

Is Turbotax saying you're getting $136 of savers tax credit, or all credits add up to $136? If it's definitely saying that's your savers tax credit amount, then either your total tax liability is $136, so the savers tax credit can only be that much, or somehow what you have inputted is telling turbotax that you have had a total of $1360 of retirement contributions (since that's how it would end up at $136).

[MustardTiger]

I think I understand now.  Due to other credits we don't have enough tax liability, or they don't pay you if you don't owe anything.  This was an unusual year where we had low income.  Can I change my roth ira contributions to be reflected in 2018?  I contributed the max to my wife's account this month, but considered it as 2017.

[terran]

You might be able to (call your custodian). That would only really make sense if 1) you think you might not be able to hit the $2000/person savers tax credit limits in 2018, or 2) you might like to recharacterize it to traditional in 2018 to reduce an increase in income. Otherwise you're already paying $0 tax (other than self employment tax, which isn't reduced by the savers credit), so you may as well get the tax free money into roth and save the 2018 space for this year.

On the other hand, if your wife made her solo 401k contributions in 2018 you may see if she can get her custodian to classify some those as 2018 (only if she'll have the income to support it of course) such that you get to "keep" more of the credit. Basically, what you should have done in an ideal world what contribute a little less to tax deferred accounts (it's hard to get it exactly right though).

[MDM]

When deciding on traditional vs. Roth contributions, it's not the absolute amount of tax that matters.  It's the marginal tax rate you would save on the traditional contribution amount, vs. the marginal rate you expect to pay on future withdrawals.

If you already have your 2017 information in TurboTax (or similar) you can change tIRA contribution amounts to see what marginal rates you get.  The 2017 version of the case study spreadsheet can also be used.

Don't know why one would want "roth ira contributions to be reflected in 2018" instead of 2017, if by that you mean you would make no 2017 IRA contributions at all.

You may still recharacterize 2017 IRA contributions from Roth to traditional or vice versa if desired.