Like other Americans, you might be having problems finding a way to save for your retirement or do any kind of income tax reduction or tax planning. Even with the tax deduction, workers that make less than $40 - 50,000 annually may be strapped to find room in their budgets for contributions to an IRA or an employer's qualified plan, especially if they have dependents. Once the mortgage, car payment, insurance coverage, utilities and other month to month living expenses have been completely paid, there may be small or absolutely nothing left to save for the golden years.
However, there is an income tax reduction tool for cash-strapped workers to have the ability to either begin or at least increase their retirement savings by a few hundred us dollars each year. Congress provides a retirement incentive called the Retirement Saver's Tax Credit. This is a non-refundable credit that can reduce any qualified taxpayer's total tax owed on a dollar-for-dollar basis, depending upon how much the tax payer contributes to his or her retirement program or IRA.
|Credit Rate||Married Filing Jointly||Head of Household||All other filers|
To qualify, you have to be at least eighteen years old and cannot be a full-time student with another person claiming you as a dependent on their annual tax return. This income tax reduction tool may be used in addition to any deductions that you may claim as a result of creating retirement strategy contributions such as IRAs or 401ks. Any participation to a traditional or Roth IRA, SEP, Simple IRA, 401(k), 403(b) or 457 plan will count towards the credit. The amount of the credit will range from 10% to 50% of your eligible contribution amount as much as $2,000. This places the greatest possible credit quantity at $1,000 (up to $2,000 credit if filing jointly and every spouse brings $2,000 or more to a retirement strategy). The table above shows the amount of credit that may be claimed.
The more modest your adjusted gross income (AGI), the higher the credit. For example, if you are married filing jointly, your AGI less than $33,500, and you each make Roth IRA contributions of $2,000, you will get the complete credit of $1,000 each (a total of $2,000). Therefore, if you find yourself above these income thresholds but just a little, some income tax reduction can help you engineer your revenue to possibly meet the criteria for the credit.
If you are behind in conserving for retirement and want to make use of this income tax reduction chance to begin catching up, take advantage of what IRS offers.
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