Let The IRS Help Subsidize Your Retirement

Congress loves to reward us for retirement savings!  First, you can take an adjustment to your gross income (thereby lowering your total taxable income) by making contributions to a traditional IRA.  Second, you can also potentially claim the Savers Credit for that same contribution (and contributions to other retirement savings plans)!

Here’s how it works:

1. Was your income and filing status?

• Single with income up to $26,000
• Head of Household with income up to $39,000
• Married Filing Jointly, with incomes up to $52,000

2. Were you born before January 2, 1990 and not a full time student, and not someone else’s tax exemption?
3. Did you make eligible contributions to a:
   

            Roth IRA
            Traditional IRA
            401(k) or SIMPLE 401(k) plan
            Governmental 457 plan
            SIMPLE IRA   
            Salary reduction SEP
            Section 501(c)(18) plan

If you answered yes to the above questions, then you’re in the running for this credit!

The maximum eligible contribution on which you can base the credit is $2,000 per person.  The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.  This is a nonrefundable credit – which means that you can’t use the credit if your tax liability is already zero.

One point to remember:  Generally, when claiming the credit, you must reduce the contribution amount by any distributions you received from any IRA, plan or annuity.  This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.

For more detailed information, see Chapter 5 of IRS Publication 590.  Or, visit your local PRO-TAX office, so we can help you navigate the IRS rules to make sure the government is subsidizing your retirement.

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