Could you really get a credit for retirement savings? Yes you can!
You may qualify for the Saver’s Credit of up to $1,000 ($2,000 if married filing jointly) for contributions you make to an IRA and certain retirement plans; you have until April 15, 2015, to make IRA contributions for 2014.
Unlike a deduction, a credit is a dollar-for-dollar reduction of your federal income tax liability, and this can reduce the amount you owe or increase your refund for taxes already paid.
Are you eligible?
To claim the Saver’s Credit for 2014, you must be:
- age 18 or older,
- not a full-time student,
- not claimed as a dependent on another person’s return, and
- with an adjusted gross income of not more than:
- $60,000 if your filing status is married filing jointly,
- $45,000 if your filing status is head of household, or
- $30,000 if your filing status is single, married filing separately or qualifying widow(er).
Are your 2014 contributions eligible for the credit?
Eligible contributions include:
- contributions to a traditional or Roth IRA, and
- salary reduction contributions (including voluntary after-tax and designated Roth contributions) to your employer’s 401(k), SIMPLE IRA, SARSEP, 403(b), 501(c)(18) or governmental 457(b) plan.
Rollover contributions aren’t eligible for the Saver’s Credit. Your eligible contributions may be reduced by any recent distributions you received from an employer-sponsored retirement plan or an IRA.
Amount of the credit
The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10 percent or as high as 50 percent, depending on your income and your filing status.