Tuesday, June 21, 2011

The Retirement Savers Credit

If you contribute to a 401(k), SEP, SIMPLE, IRA or Roth and have modest income, there may be a federal tax credit for you. It is the “credit for qualified retirement savings,” shortened to the savers credit in practice. The credit can be as much as $1,000 per person and phases out as your income rises.

If you are single, the credit phases-out at $27,750. For head-of-household it is $41,625 and for marrieds it is $55,500.

You claim the credit on Form 8880. There are some restrictions, such as you cannot be a full-time student or be claimed as a dependent.

By the way, you may overlook this credit if you file a 1040-EZ, as the form does not have a line for it.

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