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Case of the Week: Retirement Savings Tax Credit

The ERISA consultants at the Retirement Learning Center Resource regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with an advisor in Oklahoma is representative of a common inquiry regarding available tax credits for retirement contributions. The advisor asked,

“What contributions are eligible for the retirement savings tax credit?”

Highlights of Discussion

IRA owners and retirement plan participants (including self-employed individuals) may qualify for a retirement savings contribution tax credit. Details of the credit appear in IRS Publication 590-A and on the IRS' Saver's Credit page.

The credit:


  • equals an amount up to 50%, 20% or 10% of the taxpayer’s retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on adjusted gross income (as reported on Form 1040, 1040A or 1040NR);

  • relates to contributions taxpayers make to their traditional and/or Roth IRAs, or elective deferrals to a 401(k) or similar workplace retirement plan; and

  • is claimed by a taxpayer on Form 8880, Credit for Qualified Retirement Savings Contributions.


In general, the contribution tax creditis available to individuals who:

  • are age 18 or older;

  • are not full-time students;

  • are not claimed as a dependent on another person’s return; and

  • have income below a certain level.


2018 Saver’s Credit Income Levels


































Credit RateMarried Filing JointlyHead of HouseholdAll Other Filers*
50% of your contributionAGI not more than $38,000AGI not more than $28,500AGI not more than $19,000
20% of your contribution$38,001 - $41,000$28,501 - $30,750$19,001 - $20,500
10% of your contribution$41,001 - $63,000$30,751 - $47,250$20,501 - $31,500
10% of your contribution$41,001 - $63,000$30,751 - $47,250$20,501 - $31,500

*Single, married filing separately, or qualifying widow(er)

The IRS has a handy on-line “interview” that taxpayers may use to determine whether they are eligible for the credit.

Conclusion

Every deduction and tax credit counts these days. Many IRA owners and plan participants may be unaware of the retirement plan related tax credits for which they may qualify.

Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Consumers should consult with their tax advisor or attorney regarding their specific situation.

©2018, Retirement Learning Center, LLC. Used with permission.

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