saver's tax credit

[Milizard]

Is it even possible to maximize the saver's tax credit since it is refundable?  2018 is the first year we qualify, so I am not very familiar with it, and my husband does our taxes (via turbotax).  Looks like my credit maxes out at $200, though I'm not sure why.  (Playing with traditional/Roth IRA scenarios.  We're thinking one of us going with $5500 traditional and the other $5500 Roth.)
I don't want to spend too much of my time unraveling the tax code, as it will annoy me, but I am curious if anyone can even get the $1000/2000.

[zolotiyeruki]

I'm afraid I don't have an answer for you.  However, there is a Taxes-specific subforum where you might have more success.

[Milizard]

Thanks. I didn't realize,  as I normally hang out here.

Perhaps a mod can move this over there.

[MDM]

Is it even possible to maximize the saver's tax credit since it is refundable?  2018 is the first year we qualify, so I am not very familiar with it, and my husband does our taxes (via turbotax).  Looks like my credit maxes out at $200, though I'm not sure why.  (Playing with traditional/Roth IRA scenarios.  We're thinking one of us going with $5500 traditional and the other $5500 Roth.)
I don't want to spend too much of my time unraveling the tax code, as it will annoy me, but I am curious if anyone can even get the $1000/2000.

The short answer to "is it even possible" is "yes", but not for every possible situation.  In fact, IIRC, only a relatively small fraction of returns will qualify (e.g., some HOH returns).

[dollarchaser]

Earlier today I waded through my returns on turbotax. The savers credit was tied to income and was a sliding percentage type of equation. Make a small income but save a lot will allow someone to 'max' the credit. At least that is how i had understood it.

[MDM]

Earlier today I waded through my returns on turbotax. The savers credit was tied to income and was a sliding percentage type of equation. Make a small income but save a lot will allow someone to 'max' the credit. At least that is how i had understood it.

The trick is that the saver's credit is non-refundable, meaning that it can reduce your taxes to zero but no further.

E.g., a single filer with $19K AGI could qualify for a $1000 saver's credit, but the tax on $19K AGI using the standard deduction is only $700, so only $700 of the saver's credit is used.  A single filer making $19001 AGI gets no more than $400 for a saver's credit.

[Milizard]

Is it even possible to maximize the saver's tax credit since it is refundable?  2018 is the first year we qualify, so I am not very familiar with it, and my husband does our taxes (via turbotax).  Looks like my credit maxes out at $200, though I'm not sure why.  (Playing with traditional/Roth IRA scenarios.  We're thinking one of us going with $5500 traditional and the other $5500 Roth.)
I don't want to spend too much of my time unraveling the tax code, as it will annoy me, but I am curious if anyone can even get the $1000/2000.

The short answer to "is it even possible" is "yes", but not for every possible situation.  In fact, IIRC, only a relatively small fraction of returns will qualify (e.g., some HOH returns).

I see. That would be  $1000.  Theoretical max for a joint return is $2000, but probably not possible due to the standard deduction, or whatever they're calling it these days.  Good to know at least  $1000 is possible.  Thanks for the answer.

[terran]

Right, since it's non-refundable, in normal situations, you can't get the full maximum credit. As @MDM mentioned I'm pretty sure I've seen some specific examples where you could (it would have to involve something that raises tax without raising AGI), but generally not.

This is because you need an AGI under $38,500 as MFJ to get the full $2000 credit, but under normal circumstances, and assuming all of that is earned income (capital gains would increase AGI without increasing tax at that income) your total tax due would be about ($38500 AGI - $24k standard deduction) x 10% tax bracket = $1450, so that would be your max savers credit. Therefore, the trick to to balance Roth/traditional such that you're as close to $38500 AGI without going over.

Remember you can recharacterize your IRA contributions any time up until your tax filing deadline.

[MDM]

Right, since it's non-refundable, in normal situations, you can't get the full maximum credit. As @MDM mentioned I'm pretty sure I've seen some specific examples where you could (it would have to involve something that raises tax without raising AGI), but generally not.

Now I remember: excess Advance Premium Tax Credit repayment can allow use of the entire saver's credit for single and MFJ filers.