Do We Need to File a Roth IRA Contribution for the Tax Year?

Individual retirement accounts were first created in 1974, but originally only offered tax-deferred savings. In 1997, however, Congress created Roth IRAs to give you the option to save money on an after-tax basis. Because your contributions are made with after-tax money, you won't get a deduction, but you may qualify for the Saver's Credit.

No Deduction

Roth IRA contributions do not appear on your tax return because, unlike traditional IRA contributions, they aren't deductible from your taxable income. Because of this, there's no reason to tell the IRS whether you made a contribution or not. It will not affect your tax return. Instead of a deduction, you get a different tax benefit with a Roth IRA: you can take tax-free qualified distributions of not only your contributions, but also the profits that have accumulated in the account.

Saver's Credit

Your Roth IRA contribution might still get you a tax break even though it's not deductible, if you qualify for the Retirement Savings contributions Credit, also called the Saver's Credit. The credit equals between 0 and 50 percent of what you contribute, depending on your adjusted gross income. In addition, only the first $2,000 of contributions count toward calculating the credit. If you're married filing jointly, the credit counts up to $2,000 per spouse, so if you and your spouse contribute $2,000, the credit is figured as if $4,000 were contributed.

Saver's Credit Eligibility

To be eligible, you must be over 18 years old and not a full-time student during any five months during the year. In addition, your modified adjusted gross income must fall below the annual limits for your tax filing status. The lower your income, the larger the percentage of the credit. For 2013, your credit is $0 if you are single or married filing separately and your MAGI exceeds $29,500. If you're head of household, the limit increases to $44,250. For joint filers, it goes up to $59,000.

Claiming the Saver's Credit

To claim the saver's credit for your Roth IRA contributions, you must file your income taxes with Form 1040 or 1040A and attach Form 8880. Form 8880 calculates the amount of the credit based on your income and contributions. Then, the credit appears on line 50 if you use Form 1040 or line 32 if you use Form 1040A.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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