A Little-Known Tax Credit That Builds Your Retirement

One of the best tax credit and reduction opportunities for anyone with a retirement account is also one of the least-known ones.

Do you know about the saver’s credit and what it can do for you? Here is what you need to know.

What is the saver’s credit tax break?

The saver’s credit is officially known as the retirement savings contribution credit. The saver’s credit offers special tax credits and breaks to low and middle-income level Americans who are actively saving for retirement.

This specialized tax credit can be applied in addition to any other retirement account tax benefits. And for those that qualify, a saver’s credit tax break can appreciably reduce or even sometimes eliminate a tax bill under some circumstances.

The aim of the saver’s credit is to encourage as many Americans as possible to open retirement accounts via tax incentives.

Benefits of the saver’s credit

The saver’s credit offers anyone with a retirement account.

Contributing to a retirement account is a tax deduction within itself. Tax deductions reduce the amount of taxes that can be legally levied against your income.

Tax credits, like the saver’s credit, reduce the amount of taxes you owe dollar-for-dollar.

How much of a tax break can be earned via saver’s credit?

You can claim a tax credit via the saver’s credit based on the percentage of your contribution to your retirement account.

Based on adjusted gross income (AGI) guidelines you can claim tax credits based on contribution amounts.

The saver’s credit maximum worth is $200, $400, or $1,000 for qualifying single filers or $2,000 for married joint filers.

And the saver’s credit amount is commensurate to 10%, 20%, or 50% of the maximum contribution amount.

The maximum contribution amount to a retirement account to qualify for a saver’s credit is $2,000 for a single filer and $4,000 for married joint filers.

How does one qualify for a saver’s credit?

To qualify for a saver’s credit, you must be at least 18 years old. You can’t be currently claimed by someone else as a dependent on their tax returns.

You must own a retirement account and you must have made a contribution to that account within the tax year during which you file your tax return.

However, these saver’s credit requirements do not automatically mean that you qualify for the tax credit. Your income status as a single or married person must not be higher than the saver’s credit AGI guidelines.

Typically, those in the working-class or middle-class tax bracket will qualify for the saver’s credit.

You can find the AGI saver’s credit guidelines for at the IRS website. You need I.R.S. Form 8880 to apply for the saver’s credit.

Best Deal for Social Security: Retire at 62, 67 or 70?

What's the best age to start taking Social Security? This is a very good question!You have the option to take retirement benefits as early as age 62. However, s0-called "full"

Bad Advice Could Cost You More Than $5,000 a Year in Lost Retirement Benefits: Report

As many as 9,224 widows and widowers aged 70 and up have been underpaid beneficiary benefits for years — at a cost to them of nearly $132 million in lost

10 Ways to Live Frugally Without Looking Cheap

There is no way around it, we live in a status-driven society. Whether that is owning the newest Gucci purse or buying a shiny new car, people judge other people

Opinion: Never Let a Robot Choose Your Investments

We live in a fast-paced world. This motivates many people to automate menial tasks, including investing. That may work for a while, which gives you a false sense of security.

3 Dangerous Things to Avoid If You Inherit Money

Are you due to gain an inheritance anytime soon? Maybe you should not start celebrating or counting that inheritance money before it is in your hands. While gaining an inheritance

Nasty Diseases You Can Get from Your Pets, and How to Prevent Them

We all love to give our pets lots of kisses and cuddles, but what if you end up with a nasty parasite or viral infection? Animals are unfortunately prone to

4 Red Flag Warnings of a Bad Stock Investment

When looking to buy a company that you want to add to your portfolio, there are several things to look for. There are also several things to beware. I believe

What Does the Executor of a Will Do?

The executor is the designated representative who is supposed to ensure that the estate is properly settled and that the assets are distributed according to the wishes of the deceased.

4 Killer Diseases That Can Be Treated with Cayenne Pepper

Did you know that there is one natural remedy that can protect against every leading cause of death in Western countries? It’s time for a new go-to remedy to join

3 Simple Money-Making Rules for Stock Investors

There are lots of different ways to invest and so many companies to choose from. It can become overwhelming, especially for a new investor.  If you are new to investing

4 Reasons to Reconsider Retiring to Florida

So, when one thinks of a place to live out retirement, what state comes to mind? Florida. The state of Florida is the common answer to living out retirement if

35 Benefits of Active Mindfulness

The stress of trying to have it all can leave us feeling like we have nothing at all. If we just take a step back to smell the roses, our