1)Credit for 2016 is affected by distributions from 2014-2016 and also up to filing date in 2017
2)Credit for 2017 is affected by distributions from 2015-
2017 and also up to filing date in 2018
Suppose a single distribution of 2K is made in 2016.
Would that single distribution negate IRA contributions of 2K in both 2016 and 2017?…….so no credit even though there was a net overall contribution in those yrs?
Kaneohe, the 2000 distribution in 2016 would reduce the contributions made in 2016 and 2017, but a 4000 contribution in those years would just be reduced to 2000, so a max savers credit could still be generated for those two years. Of course once the reduction totals reach the contribution max for a year, then all credit potential is extinguished.
In other words, the taxpayer could not make an excess IRA contribution that exceeds the reduction by 2000 or any other amount in order to generate a credit. Any excess contribution is not treated as an eligible contribution if it is removed with earnings by the deadline.