INTERNAL REVENUE SERVICE – Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.
Here are seven points the IRS would like you to know about the Saver’s Credit:
1. The Saver’s Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.
2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your tax return if your filing status and income are:
- Single, married filing separately or qualifying widow or widower, with income up to $29,500
- Head of Household with income up to $44,250
- Married Filing Jointly, with income up to $59,000
3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student last year nor claimed as a dependent on someone else’s tax return.
4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.
5. The Saver’s Credit reduces the tax you owe.
6. Use IRS Form 8880 Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you, or your tax preparer, use IRS e-file the software will do this for you.
7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.
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For immediate assistance with the savers credit, or another tax matter, contact us today at 1-714-382-6780 for a FREE and CONFIDENTIAL consultation with our CPAs and former IRS Agents.
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