Time to Get to Know the Saver’s Credit
The Saver’s Credit (aka the Retirement Savings Contributions Credit) helps lower to middle income taxpayers to reduce their taxes when they contribute to an employer retirement plan or a traditional or Roth individual retirement account. The vehicle is a nonrefundable tax credit, the amount being based on adjusted gross income. (A nonrefundable tax credit is limited in that “once a taxpayer’s liability is zero, the taxpayer won’t get any leftover amount back as a refund,” according to the IRS.) The Saver’s Credit was enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001.
Since all credits have limits, let’s start there. First, there is a limit on the contribution amount that can be used to claim the credit. The maximum contribution to an IRA or 401(k) or other retirement plan that can qualify for the credit is $2,000 for an individual and $4,000 for those who are married and filing jointly.
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