What Is The Saver’s Credit?

 Save for your retirement

The Saver’s Credit also known as the retirement savings contributions credit, this is the tax credit which helps both low and moderate income workers to save for their retirement.

Like other tax credits, the Saver’s Credit can either increase a taxpayer’s refund or reduce the balance due.
The maximum Saver’s Credit is $1,000 for singles and $2,000 for married couples, but due in part to the impact of other deductions and credits, it is often much less than the allowed amount and may sometimes be zero for some taxpayers.

The credit amount is based on the following:

1.      The taxpayer’s filing status

2.      Their adjusted gross income

3.      Their tax liability

4.      Amount contributed to their qualifying retirement programs.

Use  Form 8880 to claim the Saver’s Credit and record the credit amount on page 2 of Form 1040.

Certain distributions from retirement plans may reduce the contribution amount used to figure the credit. For 2014, this rule applies to retirement distributions received after 2011 and before the due date, including extensions, of the 2014 tax return. Form 8880 and its instructions have details on making this computation.

The Saver’s Credit supplements other tax benefits available to taxpayers who set money aside for their retirement. For example, most taxpayers may deduct their contributions to a traditional IRA

Other special rules that apply to the Saver’s Credit include the following:

·      Taxpayers must be at least 18 years of age.

·      Can not be claimed as a dependent on someone else’s tax return.

·      A student cannot take the credit.*

Save money for your retirement

*If a person who enrolled as a full-time student during any part of 5 calendar months during the year, he is considered a student.

In sum, the Saver’s Credit can be claimed by the following taxpayers:

·      Married couples filing jointly with incomes up to $60,000 in 2014;

·      Heads of Household with incomes up to $45,000 in 2014; and

·      Married individuals filing separately and singles with incomes up to $30,000 in 2014

Begun in 2002 as a temporary provision, the Saver’s Credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of this credit, income limits on this credit are now adjusted annually in order to keep pace with inflation. More information about this credit can be found on IRS.gov.

If you have any questions, please feel free to email us. 

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Source: www.irs.gov.
Email: Excellent-tax@gmx.com