Save on Your Taxes and for Retirement with the Saver's Credit
Have you ever heard of the Saver’s Credit? Officially known as the Retirement Savings Contribution Credit, it is a tax credit that is available to some taxpayers who make contributions to either a 401(k) plan or a retirement plan. The goal of this credit is to encourage and allow people to reduce their taxes and save more for their retirement. It is offered in addition to deductions that you may be able to take for making the contributions themselves – in other words, you can deduct your contributions to a traditional IRA, yet still qualify for the Saver’s Credit.
The amount of credit that you are about to take for making these contributions depends upon your individual circumstances. The maximum credit for a couple that is married and filing a joint return is $4,000, and for those who are filing as single the maximum is $2,000. In most cases people receive less than the maximum credit as a result of other credits and deductions that they take. The credit can be claimed by those who are married filing jointly whose income is $61,000 or less, by heads of households with income of $45,750 or less, and by those filing married but separate or as single who have incomes of $30,500 or less.
In order to qualify for the Saver’s Credit, a taxpayer must be at least 18 years old and can not have been a full-time student during the 2015 tax year. You are not eligible for the credit if you are claimed as a dependent by another taxpayer. If the contributions that you made were to a 401(k) or some other similar plan put in place by your employer, then your contribution must have been made during 2015. Contributions can be made into an IRA as late as the date that your tax return is due, which for 2015 is April 18, 2016 for most taxpayers.
In order to take advantage of the Saver’s Credit, you must use Form 8880, Credit for Qualified Retirement Savings Contributions.