Understanding the Retirement Savings Contributions Credit
For taxpayers who make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA), you may be eligible for a tax credit. Here are several things you should know about the Savers Credit:
- The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:
- Single, married filing separately, or qualifying widow(er), with income up to $27,750
- Head of Household, with income up to $41,625
- Married Filing Jointly, with income up to $55,500
- To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.
- If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
Another thing to realize is that when you are figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. See Publication 590 and Publication 4703 for more information.
For more information on taxes click here.
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