Learn what the Saver’s Credit is and if you qualify for it.
By Nicole Del Percio
January 24th starts tax filing season, so it’s time to start thinking about your tax return. Here is an opportunity to receive a significant tax credit called the Saver’s Credit that many are not aware of.
Be Strategic About Your Refund
74% of Americans receive a refund. If that’s you – why not get that money sooner and put it to good use? Are you trying to pay off debt, cash-flow tuition, invest more, save for a down-payment? Get that refund as soon as possible and apply it toward reaching your current goal.
Get Excited About Tax Credits
Deductions help reduce your tax liability, but a tax CREDIT is better! “Credits can reduce the amount of tax you owe or increase your tax refund, and some credits may give you a refund even if you don’t owe any tax.” (IRS.GOV) If you qualify for a $1,000 tax credit, you actually save $1,000*.
The Saver’s Credit
The Saver’s Credit – It could be worth $1,000 (or $2,000 if married filing jointly!) And yes, you read that right – CREDIT! This credit is for individuals and households who contributed to a qualified retirement savings account. If this sounds like you, check the below qualifications to see if you qualify!
- 18 years old+
- Not a full-time student
- Not claimed as a dependent
- Married Filing Jointly: Annual Gross Income ≤ $66k
- Head of Household: Annual Gross Income ≤ $49.5k
- Single or Other: Annual Gross Income ≤ $33k
Qualifying Retirement Accounts:
- 457 plan (state or local government employees)
- SEP IRA or Simple IRA plans
How Much Can You Claim?
The maximum credit you can claim phases out as your income increases.
How to Claim the Saver’s Credit
Prior to filing your taxes, talk to your tax specialist about claiming the Saver’s Credit and use Form 8880.
What to Remember
Your AGI doesn’t include your pretax retirement account contributions. While you may earn more total income, you may still qualify because those contributions offset your taxable income. Here’s a handy tool from the IRS website to see if you qualify. Take ten minutes to do some simple tax planning on your own. Can you qualify for the Saver’s Credit this year? How about making a plan to earn this sweet bonus next year?
*What if you went into work tomorrow, and your boss announced a new $1,000-$2,000 bonus available for the most responsible employees. Wouldn’t you work diligently to be that employee? Well, this is essentially the same offer the IRS is giving many of us to make good decisions about our retirement savings. By the way, aren’t all of us in the 3rd Decade™ trying to do that anyway?!