Did you contribute to TSP last year? Is your Adjusted Gross Income less than $56,500? You may be eligible to claim the Retirement Savings Contribution Credit.
The Retirement Savings Contribution Credit rewards lower-income savers with an income tax credit of up to 50% of the amount contributed to qualified retirement savings plans. The credit can be claimed by using the IRS Form 8880. It is a relatively simple form, and the instructions are included. Because eligibility is based upon AGI, even higher earning military families may qualify during years with tax-free income due to time spent in a combat zone.
The Retirement Savings Contribution Credit is non-refundable. This means that you will not receive credit if you aren’t paying any total taxes.
Most tax preparation software will walk you through eligibility for the Retirement Savings Credit. Even so, be a little familiar with it so that you can be sure that your tax software is getting all the right details. Not sure if you are eligible? Read the form’s instructions, check with your bases Volunteer Income Tax Assistance (VITA) office, or consult a tax professional. This credit can be quite valuable, especially if you contribute significant amounts to your TSP or other qualified retirement plans.