Tax Credits for IRAs, 401ks and Other Retirement Plans
If you are in the low to moderate income category, you may actually qualify for a tax credit. The credit can save you up to $1,000 if you are filing as an individual or up to $2,000 if you are married filing jointly. As with most things, you do have to follow the rules set by the IRS, but it may well be worth your while.
You Must Contribute to Your Retirement Account
This one may sound like a no brainer, but the only way that you can qualify for the tax credit on your annual return is if you make a contribution. You can claim the credit on a contribution up to $2,000 (individual) or $4,000 (joint) and you have until your return is due (April 15th) to make this contribution. If you are contributing to a workplace retirement plan, you will likely need to make this contribution by the end of the calendar year.
This “savers credit” is specifically designed for those Americans who are in the low to moderate income level. This means that you can qualify for the credit if you make $30,000 or less (2014 data). A head of household making under $45,000 and married couples making under $60,000 can also qualify. The IRS adjusts these salary amounts each year by to account for inflation.
How the IRS Calculates the Credit
The IRS calculates the amount of credit that you receive based on the amount of money you have contributed to your retirement account and your salary. You will receive either 50%, 20% or 10% of the amount you contributed with the highest credits going to those with the lowest incomes.
In the case of the savers credit, the IRS says that double dipping is okay and even encouraged. Regardless of income, everyone benefits from contributing to their retirement accounts. This credit is in addition to the tax deduction that you receive for contributing to a traditional 401K or IRA. This is a great incentive for those at lower incomes to start contributing to their future.
Success Tax Relief Can Help Find Tax Credits You Qualify For
If you qualify, the savers credit can add a few hundred dollars to your tax return while allowing some of your income to grow, which will positively impact your financial future.
If you have additional questions about whether you may qualify for a tax credit for contributing to your retirement accounts, contact the team of professionals at Success Tax Relief. We can review your tax return and related documentation and make sure that you maximize this credit, other tax credits and other potential deductions that you may be missing.
We understand how important every dollar is to you and we focus on getting our clients the most savings possible. Give our team a call at 1-877-825-1179 for a free tax consultation.