In 2014, and future years to come, low to moderate income families will be eligible for the
saver’s credit. The saver’s credit, also known as the retirement savings contribution credit, will assist in offsetting a portion of the first $2,000 workers voluntarily contribute to IRA’s and similar employee retirement programs.
There is still time for eligible employees to make qualifying retirement contributions and use the saver’s credit on their 2014 tax return. The deadline to set up a new IRA, or add money to an existing IRA is April 15, 2015. The contributions must be made by the end of the year to a 401(k) plan or similar employee retirement program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees. If a contribution by the end of the year is not feasible, it may be a good idea to plan contributions for the coming year, as an added paycheck withholding beginning in January.
The income limits to claim the saver’s credit are listed below:
-Married couples filing jointly with incomes up to $60,000 in 2014 or $61,000 in 2015.
-Head of Households with incomes up to $45,000 in 2014 or $45,750 in 2015; and
-Married individuals filing separately and singles with incomes up to $30,000 in 2014 or $30,500 in 2015.
The credit may reduce the tax owed or increase a taxpayer’s refund. The maximum saver’s credit is $1,000, $2,000 for married couples. This is credit is also impacted by other deductions and credits, filing status, adjusted gross income, tax liability and amounts contributed to the qualifying retirement programs. In 2012, saver’s credits totaling $1.2 billion were claimed on more than 6.9 million individual income tax returns. On average, the saver’s credit claimed was approximately $215 for married filers, $165 for head of households and $157 for single filers.
If you have any questions or need any additional information regarding this saver’s credit, please do not hesitate to contact us.