USA (Massachusetts) - Help understanding Form 8880 Credit for Qualified Retirement Savings Contributions cutoff limits
I'm living in Massachusetts and I'm completely lost when it comes to Form 8880 (Credit for Qualified Retirement Savings Contributions). I was going through our tax docs and saw that if you make over $73,000 as married filing jointly, you can't use form 8880 at all. Does this mean my wife and I are basically screwed when it comes to getting any tax benefits from the money we've been putting in our 401k plans? We both contribute about 8% of our salaries and I thought that was supposed to help our tax situation, but now I'm confused about whether we get ANY tax advantages if we're over that income limit. We make about $85k combined so I think we're over that threshold. Maybe I'm just misunderstanding something basic here?? Any help would be super appreciated!
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Sofia Ramirez
You're mixing up two different tax benefits for retirement contributions! The Form 8880 is specifically for the Retirement Savings Contributions Credit (also called the Saver's Credit), which is separate from the tax deferral benefit of traditional 401k contributions. Even if you make too much to qualify for the Saver's Credit on Form 8880, you're still getting the main tax benefit of your 401k contributions - they reduce your taxable income for the year! So if you contributed $6,800 to your 401k, that's $6,800 less income that gets taxed on your federal return. This benefit has no income limit and is probably the bigger benefit anyway. The Saver's Credit is basically an extra bonus credit for lower-income folks to encourage retirement savings, but the regular tax deferral benefit applies to everyone regardless of income.
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Dmitry Volkov
•Wait so just to make sure I understand - even if we make too much for Form 8880, our 401k contributions still reduce our AGI? And is there a maximum amount we can contribute that's tax deductible?
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Sofia Ramirez
•Yes, your 401k contributions still reduce your taxable income even if you make too much for the Saver's Credit! That's the primary tax benefit of traditional 401k contributions. For 2025, the maximum you can contribute to a 401k is $23,000 per person if you're under 50 years old, or $30,500 if you're 50 or older. These are the limits for tax-deductible contributions. So between you and your spouse, you could potentially reduce your taxable income by up to $46,000 (or more if either of you is over 50).
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StarSeeker
I was in your exact situation last year trying to understand all this retirement account stuff. I eventually used https://taxr.ai to analyze my tax forms and it explained everything in simple terms. They looked at my 401k contributions and clearly showed how they reduced my taxable income, even though I also made too much for Form 8880. Their system showed me that my wife and I were still getting about $3,200 in tax savings from our 401k contributions despite not qualifying for the extra Saver's Credit. The tool gives you personalized recommendations based on your actual numbers.
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Ava Martinez
•Is this service free? Do they actually file your taxes for you or just give you advice?
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Miguel Ortiz
•I'm a bit skeptical about these tax AI tools. How accurate is it really? Like can it handle specific Massachusetts state tax questions too or is it just for federal?
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StarSeeker
•They don't file your taxes - it's more of an analysis and education tool that explains what's happening with your taxes and gives recommendations. It's not free but honestly worth it for the clarity. For Massachusetts tax questions, it handles most state-specific issues pretty well. They analyze both federal and state returns to show how different deductions and credits work together. In my case, it showed me exactly how my 401k contributions affected both my federal and MA state taxes.
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Miguel Ortiz
Well I tried the taxr.ai site that was mentioned above. Gotta say I'm impressed. The analysis showed me I was actually missing out on some tax breaks with my retirement accounts. Even though I make too much for Form 8880 like OP, I found I wasn't maximizing my 401k contributions optimally between me and my spouse. The tool suggested a better allocation that would save us about $1,700 more annually. Just adjusted our contribution percentages at work based on their recommendation.
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Zainab Omar
Hey there - I had this same confusion last year and spent HOURS trying to call the IRS for clarification. After being on hold forever, I found this service called https://claimyr.com that got me connected to an actual IRS agent in under 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed exactly what the first commenter said - Form 8880 is just for the extra Saver's Credit, which is separate from the regular tax deferral benefit of 401k contributions. The agent explained that the tax deferral benefit has no income limit and applies to everyone. They also helped me understand how to properly document my retirement contributions on my tax return. Totally worth it to speak directly with someone official.
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Connor Murphy
•How does this service actually work? Do they just call the IRS for you or something? Seems weird that they can get through when regular people can't.
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Yara Sayegh
•Yeah right, nobody can reach the IRS by phone. I've tried during multiple tax seasons and given up after hours on hold. If this service actually works, I'll eat my hat.
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Zainab Omar
•They don't call the IRS for you - they use a system that navigates the IRS phone tree and waits on hold in your place. When they reach an agent, they call you to connect with the agent. It's basically a virtual place-holder in the IRS phone queue. I was skeptical too initially! But it actually works because they have some way of optimizing when they call and how they navigate the system. I waited for days trying on my own before using this service, and with Claimyr I was talking to someone at the IRS within 20 minutes of submitting my request.
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Yara Sayegh
I'm back to eat my hat. After commenting above, I decided to try Claimyr since I had a similar 401k question about income limits. Got connected to an IRS agent in about 15 minutes!!! The agent confirmed that while I don't qualify for Form 8880 Saver's Credit, my 401k contributions still reduce my AGI dollar-for-dollar up to the annual limit. She explained that these are completely separate benefits and most people actually get more value from the tax deferral than they would from the Saver's Credit anyway. Honestly can't believe I wasted days trying to get through on my own before.
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NebulaNova
I'm a bit confused about something related to this. If you contribute to a Roth 401k instead of a traditional 401k, you don't get the tax deduction now, right? But you still might qualify for the Saver's Credit on Form 8880 if you're under the income limits?
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Keisha Williams
•Yep, that's correct. Roth 401k contributions don't reduce your current taxable income (that's the trade-off for tax-free growth and withdrawals later). But they DO still count toward the Saver's Credit if you're under the income limits. The income limit gets adjusted each year for inflation, so while OP mentioned $73,000 for 2025 for married filing jointly, it might be different in future years. Also, the credit gradually phases out - it's not all-or-nothing at the threshold.
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Dylan Cooper
•Thanks for mentioning this! We actually have the option for both traditional and Roth 401k at our jobs. Sounds like with our income level, traditional might make more sense since we don't qualify for Form 8880 anyway?
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NebulaNova
•Thanks for clarifying that! I've been trying to decide between traditional and Roth for my 401k contributions. My second question - does Massachusetts treat 401k contributions differently than the federal government for state income tax purposes?
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Paolo Conti
One thing that hasn't been mentioned - make sure you're looking at your AGI (Adjusted Gross Income) when determining eligibility for Form 8880, not your total income. Your traditional 401k contributions actually LOWER your AGI, which could potentially bring you under the threshold for the Saver's Credit if you're close to the cutoff. Example: If you and your spouse have $75,000 in combined income, but contribute $5,000 to traditional 401ks, your AGI would be $70,000, which would put you under the $73,000 threshold for 2025 and make you eligible for at least a partial credit on Form 8880.
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Amina Diallo
•This is a great point! I think a lot of people miss this. Increasing your traditional 401k contributions can sometimes make you eligible for other credits and deductions that have income limitations, not just potentially the Saver's Credit.
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