Saver’s Credit: Get a Larger Tax Refund
Do you have a low to moderate income and still put cash away into a retirement account? Would you like a bigger tax refund check? If you answered yes to both questions, you may be eligible for Credit for Retirement Savings Contributions, also known as Saver’s Tax Credit. Saver’s Tax Credit began in 2002 to award low to moderate income people for saving for their futures in either a personal IRA or a work related retirement plan such as a 401 k.
How do I claim the credit if I am eligible?
In order to claim the credit, you have to meet the following criteria:
You are age 18 or older
You are not a full time student (Note: Many institutions have different definitions of “full time”).
You are not a dependent on someone else’s taxes
Your adjusted gross income (AGI) must not be greater than the following limits: AGI is used to determine how much of your income is taxable. AGI consists of your gross income minus your maximum allowable adjustments.
o $26,000 for a single filer o $39,000 as a head of the household o $52,000 if you are married and files a joint return
Example: Bill is a part-time student at a community college and earns $13,000 working at a pizza place and shares an apartment with two roommates. Bill is 21 years old and opened up an IRA account. He had contributed $800 to his IRA in the 2006 tax year. Since Bill made under $26,000, he is eligible to get a $400 tax credit (50% of his total $800 contributed)
Credit Rates for total income: (Married and files a joint return)
50%: Up to $31,000
Credit Rates for total income: (Files as head of household)
50%: Up to $23,250
Credit Rates for total income: (Other category of filers)
50%: Up to $15,500
0%: $26,000+ CHART: Investopedia.com
If you think you meet all the criteria listed above, contact your tax professional and advise them. According to an article on Sun-Sentinel.com, you do not have to be a tax expert to get these credits. If your income is below $39,000, you are eligible for free tax help in one of 12,000 centers across the country. These centers are known as Volunteer Income Tax Assistance programs, also called VITA. You can find one near you by calling 800-829-1040 or visit http://www.irs.gov/individuals/article/0,id=107626,00.html on the web. Seniors can get special help by calling 888-227-7669