The saver’s tax credit
The saver’s tax credit may help you save for retirement.
Saving for retirement is a challenge for most people. The rising cost of the necessities needed to live means less money for retirement savings. Low and moderate income earners are impacted the most, and their retirement savings may be small or non-existent. In 2002, the Federal Government introduced a temporary tax credit to help offset a portion of the workers retirement savings. In 2006, the credit was made permanent.
This credit is called the “Saver’s Credit” or “the “Retirement Savings Contribution Credit.” It will help compensate workers for the first $2,000 contributed to retirement savings. The contributions must be made to workplace retirement programs such as IRA (Individual Retirement Account) and 401(k) plans.
To qualify for the Saver’s Credit, workers must be:
- Married couples filing jointly with incomes up to $60,000 in 2014 or $61,000 in 2015 or
- Heads of household with incomes up to $45,000 in 2014 or $45,750 in 2015 or
- Married individuals filing separately and singles with incomes up to $30,000 in 2014 or $30,500 in 2015
- At least 18 years of age
- Not claimed as a dependent on someone else’s return
- Not a student. A person enrolled as a full-time student during any part of five calendar months during the year is considered a student
- Use Form 8880 to claim the credit
Contributions to an existing or new retirement plan must be made by April 15, 2015 for credit to 2014 taxes. Workers should be aware that the amount of the credit is impacted by other deductions and credits. The maximum credit is $2,000 for married couples. Otherwise, it is $1,000. This credit can increase the amount of a refund or reduce the amount of taxes owed.
Michigan State University Extension educators advise taxpayers to consult their tax preparers or the IRS for more information about the Saver’s Credit and other tax credits.