Funny man. But in regards to which line, here's your information:

On a 1040, line 50 which says "Retirement savings contributions credit. Attach Form 8880". On form 8880, line 1 says "Traditional and Roth IRA contributions for 2011. Do not include rollover contributions". So yes, you are correct that the 1040 itself does not mention a Roth IRA, it simply says "Retirement savings contributions", but references Form 8880 which does explicitly say "Roth IRA contributions".

Note, line 2 says "Elective deferrals to a 401(k) or other qualified employer plan, voluntary employee contributions, and 501(c)(18)(D) plan contributions for 2011 (see instructions)", so yes if you would qualify, it appears you get the same credit whether you put into a Roth IRA/Traditional IRA or a 401k. In the example given in the OP, and in our own situation...even if you directly contributed $2,000 or over into your 401k (and thus would not gain anything tax-wise from putting into a Roth), your non-working spouse can still contribute to a Roth (or Traditional) IRA and thus get the credit.

sigh...you seem to confuse a credit and deduction. THERE IS NO DEDUCTION FOR ROTH IRA CONTRIBUTIONS. But you may go on in your confused world where credits and deductions are interchangeable and you make poor assumptions about other's gender.

Also, I would urge others not to take tax advice from many people in this thread. It is completely 100% incorrect that a non-working spouse can collect a (implied) $2000 savers credit as well. The max per couple is $2000. Each person can only get a max of $1000/spouse. And that is only if your AGI is less than something like $35k. It phases out to the $55k something. And if someone suggests you can file married separately, they clearly don't understand the implications of doing so for tax savings and especially ROTH contributions.

Also, the saver's tax credit is one which cannot be rebated. In other words, the gubimint won't pay you to save beyond abolishing all tax liability. If, as in the OP, your tax liability (before credits) is $3k and you have other credits equal to $3k, your saver's credit cannot be claimed.

But, I guess the child tax credit then becomes the same as deducting Roth IRA contributions?

I certainly sympathize with these "low income" people. I'll gladly not "deduct"/take a credit for my Roth IRA contributions than live in their situation. But then again, I can't even contribute to a Roth IRA!

I gladly stated "It is completely possible I'm using the wrong terms." And yes, I agree it's wrong to make assumptions about other's gender...kinda my point


I 100% agree that one should not fully believe in anyone's tax advice in this thread. Any ideas should be further researched on your own, or you can ask your tax professional/accountant/whatever.

We're arguing two different aspects here. I'm arguing the amount you can contribute (I did specifically say contribute) and get a credit; and you're arguing the credit, i.e. the amount your tax refund can be increased (highest amount is half...lowest is one tenth...ok technically the lowest is $0, but that should be obvious). So we're both correct.


I completely understand WHY you're putting phrases like "less fortunate," in quotes, and stating you sympathize with these "low income" people. It's really not needed. As one of those "less fortunate" people who received a higher tax refund from the IRS because they contributed to a Roth IRA, I really don't care what one thinks about our situation. And speaking of assumptions...I'm guessing you don't know our situation do you? How do you know you're better off? I could make plenty of assumptions about someone who "can't even contribute to a Roth IRA!" but I won't...because obviously I don't know you. Perhaps you actually ARE living a more fulfilling life than we are? I seriously doubt it, but eh.

And now we've veered WAY off topic. My point was merely that one should look at all tax deductions/credits/whatever that they may be eligible for. If you're almost, but not quite eligible for something...perhaps you could bring your taxable income down and thus make yourself eligible. Upping your 401k contributions may just do the trick...many people will up their 401k just to get their taxable income low enough to also contribute to a Roth. Even if we're talking mega-millions in income...one should still research (or pay a good accountant to do the research) what deductions/credits they may be eligible for, what is needed to take advantage of them, etc. etc. etc.

I've read the average cost now to raise a child from birth to age 18 is around $200k, which averages out to just under $12k per year per child. I understand you don't intend to pay childcare costs, but you also never know how your family situation may change in the future (injuries, illnesses, unemployment, etc), so I wouldn't count on that savings. Also, this only gets your children to age 18. Do you plan to help them out with college at all? If so, you'll have to increase your yearly allotment per child significantly.

I'm not saying don't have children or don't have 3. Do what's best for you and your family. I just think that when you take a realistic look at costs, having children for the tax benefit seems like buying a jumbo jet just to get the peanuts.

@alohabear,
I hear that if you buy the jumbo jet you get macadamia nuts. HA!!HA!!

alohabear, I like the jumbo jet joke

As I said before, though, I'm having kids because I want to! The tax benefit is an unexpected boon.

You are correct about the $12,000 per year, but a large portion of that is housing, and we will not upgrade our housing just because we are having kids. A baby won't appreciate an extra 1,000 square feet, but they might sense the financial stress of their parents who leveraged up to purchase it.

Another large portion is childcare, and my wife is doing that. Things could always change, but various insurance policies and extended family support would cover most of those possibilities.

I account for college separately and plan to pay for it.

Are you kidding? Have you priced real, Hawaii-grown mac nuts lately? It would be more like getting the jet as a prize for buying the macs

this is not quite so straightforward. what kind of income potential is she giving up to leave the workforce to stay home? how many years of experience/career seniority will she be taking to raise the kids, and what will the effect be (the extent of reduced income) when she chooses to return to the workplace?

those *are* costs, albeit not direct ones.

True, she is giving up income potential. But I must refer back to my earlier post where I wrote about the net impact of spousal income. It barely breaks even for my wife, who is probably around the median income for a young, working woman ($25-40k).

Let's say she earns $30k. At 40% marginal taxes (federal, state, payroll) we keep $18k. Childcare might be around $1,000 per month, so that knocks her take home pay down to $6k. We can easily save $6,000 per year by her cooking, cleaning, and performing other domestic tasks that we would otherwise outsource. So the net impact of her continuing to work is nil!!! This is the logic we followed when she chose to quit just a few months ago, as her work was very unfulfilling was just a source of cashflow.

Plus, our quality of life is vastly improved by having her at home. It is so much easier to get free weekends, coordinate vacations, we have lower stress levels, etc etc. (I may be only 23, but I am very much a traditionalist when it comes to the family. This arrangement is difficult unless the husband has a high income, for which I am very thankful for.)

I realized that I did not address your question about the career seniority she gives up by not working. That point is well taken and I can see how it would be a pressing issue for many couples, but for us the issue is not a big one. We have a big income disparity, where I am currently low six figures and have the long-term potential to be in the $250-500k range, whereas she would top out possibly in the $50 to 70k range.

Given this situation and her love of children, the choice was natural and obvious for us. If her home support helps me jump upwards one pay grade along the way, the gain is far greater than if she had worked for 20 years.

i think it's great that you both have the freedom to make these choices! certainly not many folks are in such a good position. i was pointing that out to note that your wife's work at home came at its own cost, and i'm glad to see you've already considered that- especially in the context of your partnership.

Question, how does a mid-career field level employee estimate future income to be half a mil? I have friends who's business is in the devil's blood, who are registered engineers, mid-career and don't ever plan to be in the half a mil income range....

I guess I overheard a gent at the airport a while back who was giddy about being offered $200k salary for poking some holes in the ground....I'm sure it is possible to shift a salary by an order of magnitude over the course of a career.

Either way, if you have money that you find to be a burden, I'm always happy to haul away cash (for free even!).

In the course of a stereotypical 40 year career, a $100k salary will grow into a $400k salary just from inflation alone.

That's assuming average salaries are keeping up with inflation. Some would argue they are not (especially if include housing, health care, higher education in that calculation)

The "mid-career field level" employee was hypothetical in my first post. I'm actually an entry-level engineer. Starting salaries in the "devil's blood" industry have crossed the six figure threshold, not to mention the nice signing bonuses.

My low side is pretty easy to explain. The typical engineer here at Big Oil will retire with a pay target of around $180k, with a $50-70 in bonuses, etc. Total pay = 250k. (As a sidebar, I know older engineers at smaller companies right now who are over 300k as long as the oil price stays high. It's a hot market.)

The high side estimate of 500k is kind of arbitrary, but there are a few ways to get there. If you get on the management track, you're there (my boss = ~300k... his boss = ~350-500k... his boss=$500-800k). If you go work overseas as an engineer your pay typically gets multiplied by about 2.5, so that's another way to skin the cat. As far as the managers overseas... well... if I get that far I'll send you a wheelbarrow of cash.

But my range does assume the status quo is unchanged. If oil goes to $40 per barrel then things will look much different and I might be looking for a job. I'm always thankful for my daily bread today