The IRS is reminding taxpayers how certain taxpayers can save for retirement and receive a special tax credit known as the saver’s credit for the 2014 tax year and years going forward. Since this is a tax credit, the saver’s credit can be used to reduce the amount of tax owed or to increase the amount of a refund received.
Read on to learn what the saver’s credit is and how you may be able to take advantage of it.
What is the saver’s credit?
The saver’s credit is a credit that helps a worker offset the first $2,000 they voluntarily contribute to an IRS, a 401k plan, or other similar workplace retirement programs.
The saver’s credit, which is also known as the retirement savings contribution credit, is one of several tax savings that may be available.
How do I qualify for the saver’s credit?
The maximum amount of the saver’s credit is $1,000 for individuals or $2,000 for married couples. However, the actual amount of the saver’s credit for which a taxpayer qualifies may be less than these amounts or even zero.
Following are the various attributes a taxpayer must meet to receive the saver’s credit, as well as other factors to consider in determining the saver’s credit.
Make a Contribution to a Qualifying Retirement Account
To obtain the saver’s credit, a taxpayer must make a contribution to an existing or newly established IRA, or to another qualifying retirement savings account. The contribution must be made no later than April 15, 2015, to qualify the taxpayer for the saver’s credit for the 2014 tax year.
The amount of the saver’s credit can be no more than the amount contributed to a qualifying retirement account, up to the maximum of $1,000 for individuals or $2,000 for married couples.
Contributions to a Roth IRA are not considered in determining if a taxpayer has made qualifying contributions to a retirement account.
Maximum Income At or Below Allowed Threshold
The maximum income a taxpayer can earn and still qualify for the saver’s credit is based on the taxpayer’s filing status as follows:
- Those filing as Head of Household with an income of up to $45,000 for 2014 or up to $45,750 for 2015;
- Those filing as Married filing Jointly with an income of up to $60,000 for 2014 or up to $61,000 for 2015; or
- Those filing as Married filing Separately with an income of up to $30,000 for 2014 or up to $30,500 for 2015.
Other Requirements and Considerations
In addition, the taxpayer must meet all of the following requirements in order to obtain the saver’s credit:
- The taxpayer must be at least 18 years old.
- The taxpayer cannot be claimed as a dependent on anyone else’s tax return.
- The taxpayer cannot be a student. A student is anyone enrolled as a full-time student during any part of five calendar months during the tax year.
Finally, if the taxpayer took any distributions from a qualifying retirement plan during the tax year, the saver’s credit would be reduced based on the amount of the distributions.
How do I claim the saver’s credit on my tax return?
A taxpayer may complete Form 8880 in order to claim the saver’s credit. You can obtain help from a tax attorney in order to complete this form or to get any other help you need in filing your tax return.
A tax attorney is the only person who has both the education and experience to help you complete your taxes and can offer attorney-client privilege of an attorney. If you are ready to get help from a tax attorney, you can complete the form below or call the phone number at the top of this web site.
As the initial consultation is free of charge, you have every reason to make the call today.
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Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.