The Savers Tax Credit

Everyone knows that saving for retirement is important. However, that certainly doesn’t make it easy. Fortunately, there are many credits and programs that exist to make it, at the very least, a little bit easier.   

One such credit is the Saver’s Credit, which was designed specifically to help average people save for retirement. If you qualify for this credit, you could enjoy a tax credit for as much as half of your retirement contributions.

Are You Eligible?

Whether you are eligible for this credit or not and how much of a credit you are eligible for depends on your filing status, as well as how much you make each year. Some people can earn a 10% credit, while others earn a 20% credit or even the aforementioned 50% credit.

For people who are single, married filing separately, or widowed, here are the eligibility factors:

l  If you have an adjusted gross income between $19,751 and $30,500, you are eligible for the 10% credit.

l  If you have an adjusted gross income between $18,251 and $19,750, you are eligible for a 20% credit.

l  If you have an adjusted gross income below $18,250, you are eligible for a 50% credit.

Of course, if your status changes, your eligibility will change as well. For head of household taxpayers, the limits are:

l  If you have an adjusted gross income between $29,626 and $45,750, you are eligible for a 10% credit.

l  If you have an adjusted gross income between $27,376 and $29,625, you are eligible for a 20% credit.

l  If you have an adjusted gross income below $27,375, you are eligible for a 50% credit.

For people who are married filing jointly, the limits are as follows:

l  If you have an adjusted gross income between $39,501 and $61,000, you are eligible for a 10% credit.

l  If you have an adjusted gross income between $36.501 and $39,500, you are eligible for a 20% credit.

l  If you have an adjusted gross income below $36,500, you are eligible for a 50% credit.

What You Need to Know About the Savers Credit

If you are not familiar with the saver’s credit, then stop what you are doing right now because this is definitely a credit worth knowing about...one that could end up drastically cutting your tax bill.

The credit was designed to try and encourage people to save more for retirement, something that everyone really should be doing. Through this credit, low to moderate income individuals and couples can receive a tax credit worth as much as 50% of their retirement contributions in many cases. Thus, the more you save for retirement, the less you will pay in taxes, or, if you prefer and qualify, you can put the credit toward an increased refund. What could be better?

So, Are You Eligible?

Obviously, this tax credit sounds pretty great, and it definitely is...if you qualify. Your income is the main factor in determining if you are eligible for the saver’s credit, and, if so, how much of a credit you can get.

For single, married filing separately or widowed filers, your adjusted gross income must be between $18,250 or less and $30,500- any more and you won’t qualify. Your credit percentage is based on your exact income as detailed below:

l  10% credit for income levels between $19,751 and $30,500

l  20% credit for income levels between $18,251 and $19,750

l  50% (full) credit for income levels below $18,251

Here are the breakdowns for heads of household:

l  10% for incomes between $29,626 and $45,750

l  20% for incomes between $27,376 and $29,625

l  50% for incomes below $27,375

For married filing jointly individuals, the breakdowns are:

l  10% for incomes between $39,501 and $61,000

l  20% for incomes between $36,501 and $39,500

l  50% for incomes below $36,500

If you qualify for or think you could qualify for this credit, even if not for the whole 50%, be sure to bring this up with your tax adviser or preparer so that you can make the most of this awesome tax credit while boosting your savings in the process!