26 USC 25B - Elective deferrals and IRA contributions by certain individuals

U.S Code last checked for updates: Nov 22, 2024

§ 25B.

Elective deferrals and IRA contributions by certain individuals

(a)

Allowance of credit

(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)

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 2016” in subparagraph (A)(ii) 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

(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),

(C)

the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)), and

(D)

the amount of contributions made before January 1, 2026, by such individual to the ABLE account (within the meaning of section 529A) of which such individual is the designated beneficiary.

(2)

Reduction for certain distributions

(A)

In general

(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

(e)

Adjusted gross income

(f)

Investment in the contract

(Added and amended Pub. L. 107–16, title VI, § 618(a), (b)(1), June 7, 2001, 115 Stat. 106, 108; Pub. L. 107–147, title IV, §§ 411(m), 417(1), Mar. 9, 2002, 116 Stat. 48, 56; Pub. L. 108–311, title II, § 207(4), Oct. 4, 2004, 118 Stat. 1177; Pub. L. 109–135, title IV, § 402(i)(3)(D), Dec. 21, 2005, 119 Stat. 2614; Pub. L. 109–280, title VIII, §§ 812, 833(a), Aug. 17, 2006, 120 Stat. 997, 1003; Pub. L. 110–343, div. B, title I, § 106(e)(2)(C), title II, § 205(d)(1)(C), Oct. 3, 2008, 122 Stat. 3817, 3838; Pub. L. 111–5, div. B, title I, §§ 1004(b)(4), 1142(b)(1)(C), 1144(b)(1)(C), Feb. 17, 2009, 123 Stat. 314, 330, 332; Pub. L. 111–148, title X, § 10909(b)(2)(D), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, § 101(b)(1), Dec. 17, 2010, 124 Stat. 3298; Pub. L. 112–240, title I, § 104(c)(2)(E), Jan. 2, 2013, 126 Stat. 2322; Pub. L. 115–97, title I, §§ 11002(d)(1)(C), 11024(b), Dec. 22, 2017, 131 Stat. 2060, 2076; Pub. L. 117–328, div. T, title I, § 103(e)(1), Dec. 29, 2022, 136 Stat. 5286.)

cite as: 26 USC 25B