Get a Tax Credit Now – Save for Retirement Later
The Retirement Savings Contributions Credit, also known as the Saver’s Credit, can be an invaluable tool when it comes to saving for retirement. It is a credit based on contributions to eligible retirement savings accounts, such as IRAs and 401(k)s. So how does this work? Let’s take a look!
The Saver’s Credit is especially beneficial for those with lower incomes because it increases the value of their retirement savings. To be eligible for this credit, you must meet certain income limits. These limits vary depending on your filing status and tax year: single filers with an adjusted gross income (AGI) of $32,500 or less; married filing jointly with an AGI of $65,000 or less; heads of household with an AGI of $48,750 or less; and married filing separately with an AGI of $32,500 or less.
What Restrictions Apply?
There are also certain restrictions that apply to the Saver’s Credit. For example, you cannot claim the credit if you are listed as a dependent on someone else’s tax return. Additionally, the credit will not apply if you are taking distributions from your IRA or other qualifying account during the same tax year in which you make contributions. Finally, there is a limit on how much you can contribute each year in order to qualify for the Saver's Credit. The limit in 2021 is $2,000 per person ($4,000 for married couples).
How Do I Claim It?
You can claim the Saver’s Credit by completing IRS Form 8880 when filing your taxes each year. When filling out Form 8880 be sure to double check all of your information carefully to ensure accuracy and avoid any potential penalties or complications down the line! That being said – once everything is filled out correctly – this form should not take more than 10-15 minutes to complete.
The Savings Retirement Contributions Credit can help offset part of your first $2,000 contribution towards retirement savings plans like IRAs and 401(k)s - making it easier to save now and get rewarded later! Eligible W2 employees still have time left to make qualifying contributions before April 18th 2023 deadline in order to get their credits on their 2022 tax returns. The process is simple - just make sure to double check all your information when filling out Form 8880 - and reap those rewards come tax season!