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IRS Reminds Taxpayers Of Savers' Credit

by Mike Godfrey,, Washington

21 November 2017

The Internal Revenue Service has issued a reminder to low- and moderate-income workers that they can obtain a 50 percent credit for the first USD2,000 contributed to a retirement plan, called the Saver's Credit.

Also known as the Retirement Savings Contributions Credit, the Saver's Credit helps offset part of the amount workers voluntarily contribute to a traditional or Roth individual retirement account (IRA), a 401(k) or 403 (b) plan, and similar workplace retirement programs.

Taxpayers with an IRA have until April 17, 2018, (the due date of their 2017 tax return) to contribute to the plan and have it qualify for 2017. However, contributions (elective deferrals) to an employer-sponsored plan must be made by the end of the year to qualify for the credit. The IRS advised employees unable to set aside money for this year that they may want to schedule their 2018 contributions soon so their employer can begin withholding in January.

The Saver's Credit can be claimed by:

  • Married couples filing jointly with incomes up to USD62,000 in 2017 or USD63,000 in 2018
  • Heads of household with incomes up to USD46,500 in 2017 or USD47,250 for 2018
  • Singles and married individuals filing separately with incomes up to USD31,000 in 2017 or USD31,500 in 2018

Though the maximum Saver's Credit is USD1,000 (USD2,000 for married couples), the IRS warned taxpayers that it is often much less and may be zero for some taxpayers. The amount of the credit is based on filing status, income, overall tax liability, and the amount contributed to a qualifying retirement plan, it said, adding that it may also be impacted by other credits and deductions or reduced by any recent distributions from a retirement plan.

To claim the Saver's Credit, taxpayers must complete Form 8880 and attach it to their tax return. Form 8880 cannot be used with Form 1040EZ.

In tax year 2015, the most recent year for which complete figures are available, Saver's Credits totaling nearly USD1.4bn were claimed on more than 8.1 million individual income tax returns.

TAGS: individuals | tax | employees | retirement | individual income tax | Retire | Retirement | Tax

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