The Savers Tax Credit

Are you saving in a 401(k) or 403(b) Plan?

Did you know you might be eligible for a tax credit by making a 401(k) or 403(b) contribution to the plan?
Saving for one's retirement plan is not always a priority. However, there is an added incentive to save for retirement in the form of a nonrefundable tax credit known as "the saver's tax credit". A tax credit reduces the amount of tax you owe, unlike a tax deduction that merely reduces the amount of your taxable income. A tax credit is a dollar-for-dollar reduction of taxes owed. You may be eligible to claim a tax credit of up to $1,000 when you make salary reduction contributions to your 401(k) plan, Simple 401(k), 403(b) plan, traditional IRA, or Roth IRA. The tax credit was created for low-income and moderate-income savers and has been in effect since 2002. This credit applies only as a reduction to your income tax liability, not as cash in hand via a refund. If you owe no federal income tax, you are not eligible for a tax credit. In order to qualify for the savers credit you must be: 18 years of age or older, not a full-time student, and not claimed as a dependent on someone elses return. If you think you cant afford to save for retirement, think again. Not only could contributing to your retirement plan account at work reduce the federal income tax that comes out of your paycheck, you could also get back up to $1,000 when you file your federal tax return.

Savers Credit Available to Some Taxpayers

Some taxpayers can save for retirement and earn a special tax credit. This credit, referred to as the savers credit can offset the first $2,000 contributed to the taxpayers IRA, 401(k) and other retirement plans. The Savers Credit is like a rebate: Depending on your income and tax filing status, its worth as much as 50% of every dollar you save for retirement (up to $2,000 for married taxpayers who each save at least $2,000 and file jointly; up to $1,000 for singles).

M So, what are you waiting for? Start saving for your futureand earning your credittoday!
There is a catch. The credit is only available to taxpayers which meet certain income criteria. The credit has been available as a permanent fixture since 2006 but the income amounts are indexed each year. Currently, they are:

Married Filing Jointly AGI up to $35,500 $35,501 - $38,500 $38,501 - $59,000

Head of Household AGI up to $26,625 $26,626 - $28,875 $28,876 - $44,250

Singles and Others AGI up to $17,750 $17,751 19,250 $19,251 - $29,500

Savers Credit 50% of your contribution 20% of your contribution 10% of your contribution

To claim the credit, use form 8880 together with your Form 1040. Be sure and read the instructions or consult with your tax advisor.

If you havent already enrolled in the plan, do it now! Start TODAY.

Talk to your tax advisor to see if you qualify.