November 24, 2014
What is the Saver’s Tax Credit? Who is eligible? Why should you care?
What is the Saver’s Tax Credit? Who is eligible? Why should you care?
The saver’s tax credit is also known as retirement savings contribution credit. The savers credit helps offset part of their contribution to their 401k or other similar workplace retirement plans. The tax credit can give the tax payer a bigger refund or reduce the taxes they owe. You should care because it can save you a lot of money by putting money into you retirement plan.
The savers tax credit is a tax credit lower income and non-students can get to putting money in to their Roth IRAs. You must be over 18 and fall in to the correct tax brackets. The maximum contribution amount to which this credit can be applied is $2,000. For households with an adjusted gross income of $30,000 and under ($22,500 for individuals) the credit rate is 50%. Households with an adjusted gross income of between $30,001 and $32,500 ($22,501 – $24,375 for individuals) the credit rate is 20%. For households earning an adjusted gross income of $32,501 to $50,000 ($24,376 – $37,500 for individuals) the credit rate is 10%. For example, an individual earning $20,000 who contributes $2,000 to a retirement plan will receive a tax credit of $400 ($2,000 x 20%). You should care because it is free money you could miss out on saving. There is no reason to pay extra taxes you dont have to.
Those are very good answers, gentlemen. Let’s review.
The saver’s tax credit is designed to help low to moderate income people get started and continue with their investing life. It can be used to invest in your company retirement plan (401k for example) or maybe a Roth IRA. The key is to get started and do it efficiently (keep your costs low).
Learn more about this non-refundable (it can help you reduce your taxes to $0, but not below that amount) by going here:https://www.nrsforu.com/iApp/tcm/nrsforu/learning/library/SaversTaxCreditLimits.jsp.
Keep in mind, there are eligibility requirements. Here they are outside of the income limits that Garrett discussed:
(1) Age 18 or older
(2) Not a full-time student
(3) Not claimed as a dependent on another person’s return