26 U.S.C. § 25B
§ 25B. Elective deferrals and IRA contributions by certain individuals
No plain-English explainer yet. Below is the official text. Explainers are being added section by section.
History
Changed by the 2025 tax lawAdded in 2001 by the Economic Growth and Tax Relief Reconciliation Act of 2001. Last changed July 4, 2025 by the One Big Beautiful Bill Act (2025).
Every change, newest first (13)
- July 4, 2025One Big Beautiful Bill Act (2025)
- December 29, 2022Consolidated Appropriations Act, 2023 (SECURE 2.0)
- December 22, 2017Tax Cuts and Jobs Act (2017)
- January 2, 2013American Taxpayer Relief Act of 2012
- December 17, 2010Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
- March 23, 2010Patient Protection and Affordable Care Act (2010)
- February 17, 2009Public Law 111-5
- October 3, 2008Emergency Economic Stabilization Act of 2008
- August 17, 2006Public Law 109-280
- December 21, 2005Gulf Opportunity Zone Act of 2005
- October 4, 2004Public Law 108-311
- March 9, 2002Public Law 107-147
- June 7, 2001Economic Growth and Tax Relief Reconciliation Act of 2001 · added this section
The law as written
Current through Public Law 119-102. Amendment notes omitted.
Structure
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.
For purposes of this section—
In the case of a joint return, the applicable percentage is—
if the adjusted gross income of the taxpayer is not over $30,000, 50 percent,
if the adjusted gross income of the taxpayer is over $30,000 but not over $32,500, 20 percent,
if the adjusted gross income of the taxpayer is over $32,500 but not over $50,000, 10 percent, and
if the adjusted gross income of the taxpayer is over $50,000, zero percent.
In the case of—
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
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.
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—
such dollar amount, multiplied by
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.
For purposes of this section—
The term “eligible individual” means any individual if such individual has attained the age of 18 as of the close of the taxable year.
The term “eligible individual” shall not include—
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
any individual who is a student (as defined in section 152(f)(2)).
For purposes of this section—
The term “qualified retirement savings contributions” means, with respect to any taxable year, the sum of—
the amount of contributions made by the eligible individual during such taxable year to the ABLE account (within the meaning of section 529A) of which such individual is the designated beneficiary, and
in the case of any taxable year beginning before January 1, 2027—
the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual,
the amount of—
any elective deferrals (as defined in section 402(g)(3)) of such individual, and
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
the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)).
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.
For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes—
such taxable year,
the 2 preceding taxable years, and
the period after such taxable year and before the due date (including extensions) for filing the return of tax for such taxable year.
There shall not be taken into account under subparagraph (A)—
any distribution referred to in section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
any distribution to which section 408A(d)(3) applies.
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.
For purposes of this section, adjusted gross income shall be determined without regard to sections 911, 931, and 933.
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.