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• Income for bona fide residents of American Samoa, and • Income from Puerto Rico. Eligible contributions. These include: 1. Contributions to a traditional or Roth IRA; 2. Salary reduction contributions (elective deferrals, in- cluding amounts designated as after-tax Roth contri- butions) to: a. A 401(k) plan (including a SIMPLE 401(k)), b. A section 403(b) annuity, c. An eligible deferred compensation plan of a state or local government (a governmental 457 plan), d. A SIMPLE IRA plan, or e. A salary reduction SEP; and 3. Contributions to a section 501(c)(18) plan. They also include voluntary after-tax employee contribu- tions to a tax-qualified retirement plan or section 403(b) annuity. For purposes of the credit, an employee contribu- tion will be voluntary as long as it isn’t required as a condi- tion of employment. Reducing eligible contributions. Reduce your eligible contributions (but not below zero) by the total distributions you received during the testing period (defined later) from any IRA, plan, or annuity included above under Eligible contributions. Also reduce your eligible contributions by any distribution from a Roth IRA that isn’t rolled over, even if the distribution isn’t taxable. Don’t reduce your eligible contributions by any of the following. 1. The portion of any distribution which isn’t includible in income because it is a trustee-to-trustee transfer or a rollover distribution. 2. Distributions that are taxable as the result of an in-plan rollover to your designated Roth account. 3. Any distribution that is a return of a contribution to an IRA (including a Roth IRA) made during the year for which you claim the credit if: a. The distribution is made before the due date (in- cluding extensions) of your tax return for that year, b. You don’t take a deduction for the contribution, and c. The distribution includes any income attributable to the contribution. 4. Loans from a qualified employer plan treated as a dis- tribution. 5. Distributions of excess contributions or deferrals (and income attributable to excess contributions and defer- rals). 6. Distributions of dividends paid on stock held by an employee stock ownership plan under section 404(k). 7. Distributions from an eligible retirement plan that are converted or rolled over to a Roth IRA. 8. Distributions from a military retirement plan. 9. Distributions from an inherited IRA by a nonspousal beneficiary. Distributions received by spouse. Any distributions your spouse receives are treated as received by you if you file a joint return with your spouse both for the year of the distribution and for the year for which you claim the credit. Testing period. The testing period consists of the year for which you claim the credit, the period after the end of that year and before the due date (including exten- sions) for filing your return for that year, and the 2 tax years before that year. Example. You and your spouse filed joint returns in 2016 and 2017, and plan to do so in 2018 and 2019. You received a taxable distribution from a qualified plan in 2016 and a taxable distribution from an eligible deferred compensation plan in 2017. Your spouse received taxable distributions from a Roth IRA in 2018 and tax-free distribu- tions from a Roth IRA in 2019 before April 15. You made eligible contributions to an IRA in 2018 and you otherwise qualify for this credit. You must reduce the amount of your qualifying contributions in 2018 by the total of the distribu- tions you received in 2016, 2017, 2018, and 2019. Maximum eligible contributions. After your contribu- tions are reduced, the maximum annual contribution on which you can base the credit is $2,000 per person. Effect on other credits. The amount of this credit won’t change the amount of your refundable tax credits. A re- fundable tax credit, such as the earned income credit or the refundable amount of your child tax credit, is an amount that you would receive as a refund even if you didn’t otherwise owe any taxes. Maximum credit. This is a nonrefundable credit. The amount of the credit in any year can’t be more than the amount of tax that you would otherwise pay (not counting any refundable credits) in any year. If your tax liability is reduced to zero because of other nonrefundable credits, such as the credit for child and dependent care expenses, then you won’t be entitled to this credit. How to figure and report the credit. The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status. See Form 8880 to deter- mine your credit rate. The maximum contribution taken into account is $2,000 per person. On a joint return, up to $2,000 is taken into ac- count for each spouse. Figure the credit on Form 8880. Report the credit on Schedule 3 (Form 1040), line 51; or line 48 of your Form 1040NR and attach Form 8880 to your return. Chapter 3 Retirement Savings Contributions Credit (Saver's Credit) Page 47