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Home » 401K, IRA's, Retire, Roth IRA, Taxes

What is the Retirement Savings Contributions Credit? Can I Claim it?

Submitted by G.E. Miller on Monday, 18 January 20105 Comments

Yet another case where NOT making much money actually pays off. If your income is below the follow adjusted gross income (AGI) levels for the 2009 tax year, you may be eligible for the Retirement Savings Contribution Credit on your 2009 tax return. That’s right, not a deduction, but a Credit, just for saving money. Here are the income limits to quality:

  • $55,500 (married filing jointly),
  • $41,625 (head of household), or
  • $27,750 (single, married filing separately, or qualifying widower)
  • Am I Eligible for the Retirement Savings Contribution Credit?

    retirement savings contribution creditIf you are below the previously mentioned income threshholds, you simply need to make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA). The amount of the saver’s credit you can get is based on the contributions you make and your credit rate (which depends on your income level).

    How Much is the Credit Worth?

    Zecco IRAIf you are eligible for the credit, your credit rate can be as low as 10% or as high as 50%, depending on your adjusted gross income. The lower your income is, the higher the credit rate.

    Your credit rate also depends on your filing status. The maximum credit anyone could receive is 50% on a $2,000 contribution (for $1,000), but your total may vary. To figure out exactly how much you can make, use IRS Form 8880, also known as the Credit for Retirement Savings Contributions.

    How Can I Claim the Retirement Savings Contribution Credit?

    Once you’ve filled out Form 8880, enter the amount of the credit on Form 1040 (PDF), or on Form 1040A (PDF). You cannot use Form 1040EZ to claim this credit. If you’re looking for further information, you can also check out Chapter 5 of IRS Publication 590, Individual Retirement Arrangements (IRAs), for more information.

    One last thing – if you are a full-time student for 5 months out of the calendar year, you are not eligible for the credit.
    Don’t Miss Out on Free 20SomethingFinance Content Updates!

    You May Also Find the Following Articles of Interest:

    2010 IRS Maximum Allowed 401K Contribution

    2010 IRS Maximum Allowed IRA Contribution

    Roth IRA Basics


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    5 Comments »

    • Daniel said:

      Ah I was there until the last line! I guess that’s why they do it, so kids graduating from college can’t take advantage of it. But on the otherhand, it would be a good incentive to teach saving. Oh well.

    • Robert said:

      When I doubt, try TurboTax! That thing finds every deduction you can think of, unless you’re Donald Trump and own 500 businesses, that is.

    • DC @ Dollar Commentary said:

      Wow, a pretty helpful piece of advice. It would be interesting to learn how many people who make below those levels actually save any money for retirement.

    • Daddy Paul said:

      I want to spread the word that everyone who can take advantage of the savers tax credit does so. It is one sweet deal for those who can take advantage of it!

      Savers tax credit

    • T.V. said:

      Are you sure it is a credit (and not a deduction?). If I owe $500 in taxes, but am eligible for a $1,000 credit from Form 8880 doesn’t it show up as $0? I fit in the brackets and am using TurboTax but so far no credit.

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