Will you Qualify for the Saver’s Tax Credit in 2011 or 2012?




What is the Saver’s Credit?

The Saver’s Credit (officially dubbed the ‘retirement savings contribution credit‘) is a lesser known, highly advantageous tax credit that the IRS makes available to low and moderate income taxpayers who make retirement contributions to an IRA, 401K, or any other government recognized retirement account.

It’s worth taking a serious look at as it is an actual tax credit, not merely a deduction. If  you’re not sure of the distinction – a deduction simply subtracts the value from your taxable income and you pay taxes on the remaining taxable income. A credit actually gives you the entire dollar value back or subtracts the value from the taxes you owe – making it far superior to a deduction. In the case of the Saver’s Credit, it is non-refundable, meaning it can only subtract from taxes you owe.

As we’re nearing the end of a calendar year, we’re at an important crossroads of still being able to take advantage of the Saver’s Credit in 2011 and start thinking ahead to 2012. And this year’s Saver’s Credit information has been released as well.

To qualify for the Saver’s Credit in 2011:

savers creditThe AGI (adjusted gross income) limit for the saver’s credit is:

  • $56,500 for married couples filing jointly
  • $42,375 for heads of household
  • $28,250 for married individuals filing separately and for singles

To quality for the Saver’s Credit in 2012:

The AGI (adjusted gross income) limit for the saver’s credit is:

  • $57,500 for married couples filing jointly
  • $43,125 for heads of household
  • $28,750 for married individuals filing separately and for singles

How much is the Saver’s Credit?

The short answer is that it depends on your income level and your contribution amount. It will take a bit of effort to determine how much of a credit you will receive, but don’t let that deter you – it’s free money!

The absolute most you could receive in a given year is $1,000 on a retirement contribution of $2,000. In order to figure out what kind of credit you are eligible to receive, you will have to fill out IRS form 8880 (PDF).

The 2011 and 2012 versions of this form have not yet been released, and it will change, so check back for the 2011 version, which will automatically update when released.




Once you figure out the amount of the credit from form 8880, add it to Form 1040 (PDF), or on Form 1040A (PDF)

Is anyone note eligible for the Credit?

Yes. If you are a full-time student for 5 months out of the calendar year, you are not eligible for the credit. Sorry students!

Also, if your income is above the aforementioned limits, you are ineligible.

Saver’s Credit Discussion:

  • Have you ever claimed the Retirement Savings Contribution Credit?
  • Will you claim the credit in 2011?

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