Internal Revenue Code:Sec. 25B. Elective deferrals and IRA contributions by certain individuals
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart A - Nonrefundable Personal Credits
Statute
Sec. 25B. Elective deferrals and IRA contributions by certain
individuals
(a) Allowance of credit
In the case of an eligible individual, there shall be allowed as
a credit against the tax imposed by this subtitle for the taxable
year an amount equal to the applicable percentage of so much of the
qualified retirement savings contributions of the eligible
individual for the taxable year as do not exceed $2,000.
(b) Applicable Percentage.--For purposes of this section--
(1) Joint returns.--In the case of a joint return, the
applicable percentage is--
(A) if the adjusted gross income of the taxpayer
is not over $30,000, 50 percent,
(B) if the adjusted gross income of the taxpayer
is over $30,000 but not over $32,500, 20 percent,
(C) if the adjusted gross income of the taxpayer
is over $32,500 but not over $50,000, 10 percent, and
(D) if the adjusted gross income of the taxpayer
is over $50,000, zero percent.
(2) Other returns.--In the case of--
(A) a head of household, the applicable percentage
shall be determined under paragraph (1) except that such
paragraph shall be applied by substituting for each
dollar amount therein (as adjusted under paragraph (3))
a dollar amount equal to 75 percent of such dollar
amount, and
(B) <<NOTE: Applicability.>> any taxpayer not
described in paragraph (1) or subparagraph (A), the
applicable percentage shall be determined under
paragraph (1) except that such paragraph shall be
applied by substituting for each dollar amount therein
(as adjusted under paragraph (3)) a dollar amount equal
to 50 percent of such dollar amount.
(3) Inflation adjustment.--In the case of any taxable year
beginning in a calendar year after 2006, each of the dollar
amounts in paragraph (1) shall be increased by an amount equal
to--
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 2005' for `calendar year 1992' in
subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $500.
(c) Eligible individual
For purposes of this section -
(1) In general
The term ''eligible individual'' means any individual if such
individual has attained the age of 18 as of the close of the
taxable year.
(2) Dependents and full-time students not eligible
The term ''eligible individual'' shall not include -
(A) any individual with respect to whom a deduction under
section 151 is allowed to another taxpayer for a taxable year
beginning in the calendar year in which such individual's
taxable year begins, and
(B) any individual who is a student (as defined in section
152(f)(2)).
(d) Qualified retirement savings contributions
For purposes of this section -
(1) In general
The term ''qualified retirement savings contributions'' means,
with respect to any taxable year, the sum of -
(A) the amount of the qualified retirement contributions (as
defined in section 219(e)) made by the eligible individual,
(B) the amount of -
(i) any elective deferrals (as defined in section
402(g)(3)) of such individual, and
(ii) any elective deferral of compensation by such
individual under an eligible deferred compensation plan (as
defined in section 457(b)) of an eligible employer described
in section 457(e)(1)(A), and
(C) the amount of voluntary employee contributions by such
individual to any qualified retirement plan (as defined in
section 4974(c)).
(2) Reduction for certain distributions
(A) In general.--The qualified retirement savings
contributions determined under paragraph (1) shall be
reduced (but not below zero) by the aggregate
distributions received by the individual during the
testing period from any entity of a type to which
contributions under paragraph (1) may be made. The
preceding sentence shall not apply to the portion of any
distribution which is not includible in gross income by
reason of a trustee-to-trustee transfer or a rollover
distribution.
(B) Testing period
For purposes of subparagraph (A), the testing period, with
respect to a taxable year, is the period which includes -
(i) such taxable year,
(ii) the 2 preceding taxable years, and
(iii) the period after such taxable year and before the due
date (including extensions) for filing the return of tax for
such taxable year.
(C) Excepted distributions
There shall not be taken into account under subparagraph (A)
-
(i) any distribution referred to in section 72(p),
401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
(ii) any distribution to which section 408A(d)(3) applies.
(D) Treatment of distributions received by spouse of individual
For purposes of determining distributions received by an
individual under subparagraph (A) for any taxable year, any
distribution received by the spouse of such individual shall be
treated as received by such individual if such individual and
spouse file a joint return for such taxable year and for the
taxable year during which the spouse receives the distribution.
(e) Adjusted gross income
For purposes of this section, adjusted gross income shall be
determined without regard to sections 911, 931, and 933.
(f) Investment in the contract
Notwithstanding any other provision of law, a qualified
retirement savings contribution shall not fail to be included in
determining the investment in the contract for purposes of section
72 by reason of the credit under this section.
(g) (FOOTNOTE 1) Limitation based on amount of tax
(FOOTNOTE 1) So in original. Two subsecs. (g) have been
enacted.
In the case of a taxable year to which section
26(a)(2) does not apply, the credit allowed under subsection
(a) for the taxable year shall not exceed the excess of -
(1) the sum of the regular tax liability (as defined in section
26(b)) plus the tax imposed by section 55, over
(2) the sum of the credits allowable under this subpart (other
than this section and section 23) and section 27 for the taxable
year.
Sources
(Added and amended Pub. L. 107-16, title VI, Sec. 618(a), (b)(1),
June 7, 2001, 115 Stat. 106, 108.)
Amendment of Section
TERMINATION OF SECTION
For termination of section by section 901 of Pub. L. 107-16,
see Effective and Termination Dates note below.
Miscellaneous
AMENDMENTS
2006 - Pension Protection Act of 2006 (P.L. 109-280)
SEC. 832. DETERMINATION OF AVERAGE COMPENSATION FOR SECTION 415 LIMITS.
(a) In General.--Section 415(b)(3) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 415.>> is amended by striking ``both was an active
participant in the plan and''.
(b) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
by this section shall apply to years beginning after December 31, 2005.
SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITATIONS ON CERTAIN
RETIREMENT SAVINGS INCENTIVES.
(a) Saver's Credit.--Subsection (b) of section 25B of the Internal
Revenue Code of 1986 is amended to read as follows:
``(b) Applicable Percentage.--For purposes of this section--
``(1) Joint returns.--In the case of a joint return, the
applicable percentage is--
``(A) if the adjusted gross income of the taxpayer
is not over $30,000, 50 percent,
``(B) if the adjusted gross income of the taxpayer
is over $30,000 but not over $32,500, 20 percent,
``(C) if the adjusted gross income of the taxpayer
is over $32,500 but not over $50,000, 10 percent, and
``(D) if the adjusted gross income of the taxpayer
is over $50,000, zero percent.
``(2) Other returns.--In the case of--
``(A) a head of household, the applicable percentage
shall be determined under paragraph (1) except that such
paragraph shall be applied by substituting for each
dollar amount therein (as adjusted under paragraph (3))
a dollar amount equal to 75 percent of such dollar
amount, and
``(B) <<NOTE: Applicability.>> any taxpayer not
described in paragraph (1) or subparagraph (A), the
applicable percentage shall be determined under
paragraph (1) except that such paragraph shall be
applied by substituting for each dollar amount therein
(as adjusted under paragraph (3)) a dollar amount equal
to 50 percent of such dollar amount.
``(3) Inflation adjustment.--In the case of any taxable year
beginning in a calendar year after 2006, each of the dollar
amounts in paragraph (1) shall be increased by an amount equal
to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 2005' for `calendar year 1992' in
subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $500.''.
2006 - Pension Protection Act of 2006 (P.L. 109-280)
SEC. 812. SAVER'S CREDIT.
Section 25B of the Internal Revenue Code of 1986 <<NOTE: 26 USC
25B.>> (relating to elective deferrals and IRA contributions by certain
individuals) is amended by striking subsection (h).
2005 - P.L. 109-135
(D) The matter preceding <<NOTE: 26 USC 25B.>> paragraph (1)
of section 25B(g) is amended by striking ``The credit'' and
inserting ``In the case of a taxable year to which section
26(a)(2) does not apply, the credit''.
2004 - Pub. L. 108-311 Sec 207(2) amends references in subsec. (c)(2)(B).
2002 - Subsec.411(x), Pub. L. 107-147, provides that
the amendments to Sec 25B, except as provided in subsection (c),
made by this PL take effect as if included in the provisions
of the Economic Growth and Tax Relief Reconciliation Act
of 2001 to which they relate.
2002 - Subsec. 417(1), Pub. L.107-147, makes a clerical
amendment to make Sec. 25B(g)referring to terminations
subsection (h).
2002 - Subsec. (d)(2)(A). Pub. L. 107-147 Sec. 411(m), amends
and replaces (d)(2)(A).
2001 - Subsec. (g). Pub. L. 107-16, Sec. 618(b)(1), 901,
temporarily added subsec. (g) relating to limitation based on
amount of tax. See Effective and Termination Dates of 2001
Amendment note below.
EFFECTIVE AND TERMINATION DATES
Section applicable to taxable years beginning after Dec. 31,
2001, see section 618(d) of Pub. L. 107-16, set out as an Effective
and Termination Dates of 2001 Amendment note under section 24 of
this title.
Section inapplicable to taxable, plan, or limitation years
beginning after Dec. 31, 2010, and the Internal Revenue Code of
1986 to be applied and administered to such years as if it had
never been enacted, see section 901 of Pub. L. 107-16, set out as
an Effective and Termination Dates of 2001 Amendment note under
section 1 of this title.
EFFECTIVE DATES
2006 - Pension Protection Act of 2006 (P.L. 109-280)
Section 833(d) <<NOTE: 26 USC 25B note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after 2006.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 24, 25, 26, 904, 1400C of
this title.
