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Saver's Credit
Retirement
Savings Contributions
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Taking a Saver’s Credit for
Retirement Savings Contributions
One way for low and moderate income
Americans to save on taxes is by saving
for retirement. If you make voluntary
contributions to an employer-sponsored
retirement plan or to an individual
retirement arrangement, you may be able
to take a tax credit.
Formally known as the “Retirement
Savings Contributions Credit,” the
Saver’s Credit applies to:
-
Married individuals filing
separately and single with
incomes up to $26,500 for 2010
-
Married couples, filing jointly,
with incomes up to $53,000 for
2010
-
Head of Household with incomes
up to $39,750 for 2010
To be eligible for the credit you
must be at least age 18, not be a
full-time student, and cannot be claimed
as a dependent on another person’s
return. You may be able to take a credit
of up to $1,000 (up to $2,000 if filing
jointly) if you make eligible
contributions to a qualified IRA, 401(k)
and certain other retirement plans. The
amount of the credit is determined by
your filing status, your adjusted gross
income, and your other retirement
contributions.
The credit is a percentage of the
qualifying contribution amount, with the
highest rate for taxpayers with the
least income.
When figuring this credit, you
generally must subtract the amount of
distributions you have received from
your retirement plans from the
contributions you have made. 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.
The Savers Credit is in addition to
other tax benefits which may result from
the retirement contributions. For
example, most workers at these income
levels may deduct all or part of their
contributions to a traditional IRA.
Contributions to a regular 401(k) plan
are not subject to income tax until
withdrawn from the plan.
For more information, review IRS
Publication 590, Individual Retirement
Arrangements and Form 8880, Credit for
Qualified Retirement Savings
Contributions which include the
instructions. The publication and form
can be downloaded at IRS.gov or ordered
by calling 800-TAX-FORM (800-829-3676).
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