26 U.S.C. § 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)

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

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 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

(B)

January 1, 2027 in the case of any taxable year beginning before —

(i)

the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual,

(ii)

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

(iii)

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.

Pub. L. 107–16, title VI, § 618(a)June 7, 2001115 Stat. 106 Pub. L. 107–147, title IVMar. 9, 2002116 Stat. 48 Pub. L. 108–311, title II, § 207(4)Oct. 4, 2004118 Stat. 1177 Pub. L. 109–135, title IV, § 402(i)(3)(D)Dec. 21, 2005119 Stat. 2614 Pub. L. 109–280, title VIIIAug. 17, 2006120 Stat. 997 Pub. L. 110–343, div. B, title I, § 106(e)(2)(C)Oct. 3, 2008122 Stat. 3817 Pub. L. 111–5, div. B, title IFeb. 17, 2009123 Stat. 314 Pub. L. 111–148, title X, § 10909(b)(2)(D)Mar. 23, 2010124 Stat. 1023 Pub. L. 111–312, title I, § 101(b)(1)Dec. 17, 2010124 Stat. 3298 Pub. L. 112–240, title I, § 104(c)(2)(E)Jan. 2, 2013126 Stat. 2322 Pub. L. 115–97, title IDec. 22, 2017131 Stat. 2060 Pub. L. 117–328, div. T, title I, § 103(e)(1)Dec. 29, 2022136 Stat. 5286 Pub. L. 119–21, title VII, § 70116(a)(1)July 4, 2025139 Stat. 166(Added and amended , (b)(1), , , 108; , §§ 411(m), 417(1), , , 56; , , ; , , ; , §§ 812, 833(a), , , 1003; , title II, § 205(d)(1)(C), , , 3838; , §§ 1004(b)(4), 1142(b)(1)(C), 1144(b)(1)(C), , , 330, 332; , (c), , ; , , ; , , ; , §§ 11002(d)(1)(C), 11024(b), , , 2076; , , ; , (2), (b)(1), , , 167.)

Amendment of Subsection (a)

Pub. L. 119–21, title VII, § 70116(b)July 4, 2025139 Stat. 167Dec. 31, 2026, , , provided that, applicable to taxable years beginning after , subsection (a) of this section is amended by striking “$2,000” and inserting “$2,100”. See 2025 Amendment note below.

Inflation Adjusted Items for Certain Years

section 1 of this title section 401 of this titleFor inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under and Revenue Notices listed in a table under .

Editorial Notes

Amendments

Pub. L. 119–21, § 70116(b)(1)2025—Subsec. (a). , substituted “$2,100” for “$2,000”.

Pub. L. 119–21, § 70116(a)(2)Pub. L. 117–328, § 103(e)(1)Subsec. (d)(1). , repealed , and provided that this title shall be applied and administered as though par. (1) of section 103(e) was never enacted. See 2022 Amendment note below.

Pub. L. 119–21, § 70116(a)(1), amended par. (1) generally. Prior to amendment, par. (1) defined qualified retirement savings contributions.

Pub. L. 117–328, § 103(e)(1)January 1, 20262022—Subsec. (d)(1). , which directed the substitution of “the amount of contributions made before ” for “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

January 1, 2026“(D) the amount of contributions made before ”,

Pub. L. 119–21, § 70116(a)(2)was repealed by .

Pub. L. 115–97, § 11024(b)Subsec. (d)(1)(D). , added subpar. (D).

Pub. L. 112–2402013—Subsec. (g). struck out subsec. (g). Text read as follows: “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 sections 23, 25A(i), 25D, 30, 30B, and 30D) and section 27 for the taxable year.”

Pub. L. 111–148, § 10909(b)(2)(D)Pub. L. 111–3122010—Subsec. (g)(2). , (c), as amended by , temporarily struck out “23,” before “25A(i),”. See Effective and Termination Dates of 2010 Amendment note below.

Pub. L. 111–5, § 1142(b)(1)(C), inserted “30,” after “25D,”.

Pub. L. 111–5, § 1004(b)(4), inserted “25A(i),” after “23,”.

Pub. L. 110–343, § 106(e)(2)(C), substituted “sections 23 and 25D” for “section 23”.

Pub. L. 109–280, § 833(a)2006—Subsec. (b). , reenacted heading without change and amended text of subsec. (b) generally, substituting provisions consisting of introductory provisions and pars. (1) to (3) for former provisions consisting of introductory provisions and a table of applicable percentages for amounts of adjusted gross income for a joint return, a head of household, and all other cases.

Pub. L. 109–280, § 812December 31, 2006Subsec. (h). , struck out heading and text of subsec. (h). Text read as follows: “This section shall not apply to taxable years beginning after .”

Pub. L. 109–1352005—Subsec. (g). substituted “In the case of a taxable year to which section 26(a)(2) does not apply, the credit” for “The credit” in introductory provisions.

Pub. L. 108–3112004—Subsec. (c)(2)(B). substituted “152(f)(2)” for “151(c)(4)”.

Pub. L. 107–147, § 411(m)2002—Subsec. (d)(2)(A). , reenacted heading without change and amended text of subpar. (A) generally. Prior to amendment, text read as follows: “The qualified retirement savings contributions determined under paragraph (1) shall be reduced (but not below zero) by the sum of—

“(i) any distribution from a qualified retirement plan (as defined in section 4974(c)), or from an eligible deferred compensation plan (as defined in section 457(b)), received by the individual during the testing period which is includible in gross income, and

“(ii) any distribution from a Roth IRA or a Roth account received by the individual during the testing period which is not a qualified rollover contribution (as defined in section 408A(e)) to a Roth IRA or a rollover under section 402(c)(8)(B) to a Roth account.”

Pub. L. 107–147, § 417(1)Subsecs. (g), (h). , redesignated subsec. (g), relating to termination, as (h).

Pub. L. 107–16, § 618(b)(1)2001—Subsec. (g). , added subsec. (g) relating to limitation based on amount of tax.

Statutory Notes and Related Subsidiaries

Effective Date of 2025 Amendment

Pub. L. 119–21, title VII, § 70116(a)(3)July 4, 2025139 Stat. 167

December 31, 2025“The amendments and repeal made by this subsection [amending this section] shall apply to taxable years ending after .”

, , , provided that:

Pub. L. 119–21, title VII, § 70116(b)(2)July 4, 2025139 Stat. 167

December 31, 2026“The amendment made by this subsection [amending this section] shall apply to taxable years beginning after .”

, , , provided that:

Effective Date of 2022 Amendment

Pub. L. 117–328Dec. 31, 2026section 103(f) of Pub. L. 117–328 section 6433 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective Date note under .

Effective Date of 2013 Amendment

Pub. L. 112–240Dec. 31, 2011section 104(d) of Pub. L. 112–240 section 23 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective and Termination Dates of 2010 Amendment

Pub. L. 111–148Dec. 31, 2011section 10909(c) of Pub. L. 111–148 section 1 of this titleAmendment by terminated applicable to taxable years beginning after , and section is amended to read as if such amendment had never been enacted, see , set out as a note under .

Pub. L. 111–148Dec. 31, 2009section 10909(d) of Pub. L. 111–148 section 1 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 2017 Amendment

section 11002(d)(1)(C) of Pub. L. 115–97Dec. 31, 2017section 11002(e) of Pub. L. 115–97 section 1 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Pub. L. 115–97, title I, § 11024(c)Dec. 22, 2017131 Stat. 2076

section 529A of this titleDec. 22, 2017“The amendments made by this section [amending this section and ] shall apply to taxable years beginning after the date of the enactment of this Act [].”

, , , provided that:

Effective Date of 2009 Amendment

section 1004(b)(4) of Pub. L. 111–5Dec. 31, 2008section 1004(d) of Pub. L. 111–5 section 24 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .

section 1142(b)(1)(C) of Pub. L. 111–5Feb. 17, 2009section 1142(c) of Pub. L. 111–5 section 24 of this titleAmendment by applicable to vehicles acquired after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .

section 1144(b)(1)(C) of Pub. L. 111–5Dec. 31, 2008section 1144(c) of Pub. L. 111–5 section 24 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .

Effective Date of 2008 Amendment

section 106(e)(2)(C) of Pub. L. 110–343Dec. 31, 2007section 106(f)(1) of Pub. L. 110–343 section 23 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2008 Amendment note under .

section 205(d)(1)(C) of Pub. L. 110–343Dec. 31, 2008section 205(e) of Pub. L. 110–343 section 24 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2008 Amendment note under .

Effective Date of 2006 Amendment

Pub. L. 109–280, title VIII, § 833(d)Aug. 17, 2006120 Stat. 1004

“The amendments made by this section [amending this section and sections 219 and 408A of this title] shall apply to taxable years beginning after 2006.”

, , , provided that:

Effective and Termination Dates of 2005 Amendment

Pub. L. 109–135 Pub. L. 107–16, § 901 section 402(i)(3)(H) of Pub. L. 109–135 section 23 of this title Pub. L. 107–16 Pub. L. 112–240, title I, § 101(a)(1)Jan. 2, 2013126 Stat. 2315Amendment by subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001, , in the same manner as the provisions of such Act to which such amendment relates, see , set out as a note under . Title IX of was repealed by , , .

Pub. L. 109–135 Pub. L. 109–58Dec. 31, 2005section 402(m) of Pub. L. 109–135 section 23 of this titleAmendment by effective as if included in the provisions of the Energy Policy Act of 2005, , to which it relates and applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 2004 Amendment

Pub. L. 108–311Dec. 31, 2004section 208 of Pub. L. 108–311 section 2 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 2002 Amendment

Pub. L. 107–147, title IV, § 411(x)Mar. 9, 2002116 Stat. 53

section 23 of this title Pub. L. 107–16“Except as provided in subsection (c) [amending sections 23 and 137 of this title and enacting provisions set out as a note under ], the amendments made by this section [amending this section, sections 23, 24, 38, 45E, 45F, 63, 137, 401 to 404, 408, 409, 412, 414 to 417, 457, 530, 2016, 2101, 2511, 4980F, and 6428 of this title, sections 1003, 1054, 1055, 1082, and 1104 of Title 29, Labor, and provisions set out as notes under sections 38, 415, and 4980F of this title] shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 [] to which they relate.”

, , , provided that:

Effective Date

section 618(b)(1) of Pub. L. 107–16 section 312(b)(2) of Pub. L. 108–311 section 23 of this titleAmendment by inapplicable to taxable years beginning during 2004 or 2005, see , set out as an Effective Date of 2001 Amendment note under .

section 618(b)(1) of Pub. L. 107–16 section 601(b)(2) of Pub. L. 107–147 section 23 of this titleAmendment by inapplicable to taxable years beginning during 2002 and 2003, see , set out as an Effective Date of 2001 Amendment note under .

section 618(b)(1) of Pub. L. 107–16Dec. 31, 2001section 618(d) of Pub. L. 107–16 section 24 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective Date of 2001 Amendment note under .

Coordination With Secure 2.0 Act of 2022 Amendment

Pub. L. 119–21, title VII, § 70116(a)(2)July 4, 2025139 Stat. 167

Pub. L. 117–328“Paragraph (1) of section 103(e) of the SECURE 2.0 Act of 2022 [div. T of , amending this section] is repealed, and the Internal Revenue Code of 1986 shall be applied and administered as though such paragraph were [sic] never enacted.”

, , , provided that: