Jim Blankenship Blog | Don’t Forget the Saver’s Credit on Your Tax Return | Talkmarkets - Page 2
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Through intensive study, Jim has become an expert in working with IRAs and other retirement plans.  In addition, Jim has taken the extra steps to become an Enrolled Agent, which means that he is enrolled to practice before the IRS.  Adding to these specialties, Jim is an expert in ... more

Don’t Forget the Saver’s Credit on Your Tax Return

Date: Monday, November 12, 2018 8:24 AM EDT

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed.Though the maximum saver’s credit is $2,000, $4,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs.Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement.For example, most workers may deduct their contributions to a traditional IRA.Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free.Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Other special rules that apply to the savers credit include the following:

  • Eligible taxpayers must be at least 18 years of age.
  • Anyone claimed as a dependent on someone else’s return cannot take the credit.
  • A student cannot take the credit.A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

Certain retirement plan distributions reduce the contribution amount used to figure the credit.For 2018, this rule applies to distributions received after 2017 and before the due date, including extensions, of the 2018 return.Form 8880 and its instructions have details on making this computation.

Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006.To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation.More information about the credit is on www.IRS.gov.

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