Boost Your Retirement Savings with a Tax Credit

If you contribute to a retirement plan, like a 401(k) or an IRA, you may be eligible for the Saver’s Credit.  The Saver’s Credit can help you save for retirement and reduce the tax you owe.  Here are five facts from the IRS that you should know about this credit:

1.  The Saver’s Credit is the short name for the Retirement Savings Contribution Credit.  It can be worth up to $2,000 for married couples filing a joint return.  The credit is worth up to $1,000 for single taxpayers.

2.  Eligibility depends on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2013 tax return if you’re:

     • Married filing separately or a single taxpayer with income up to $29,500

     • Head of household with income up to $44,250

     • Married filing jointly with income up to $59,000

3.  Other special rules that apply to the credit include:

     • You must be at least 18 years of age.

     • You can’t have been a full-time student in 2013.

     • You can’t be claimed as a dependent on another person’s tax return.

4.  You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit.  However, you can contribute to an IRA by the due date of your tax return and still have it count for 2013.  The due date for most people is April 15, 2014.

5.  File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software will do this for you if you e-file.

The Saver’s Credit is in addition to other tax savings you can get if you set aside money for retirement.  For example, you may also be able to deduct your contributions to a traditional IRA.