IRS Tax Preparedness: Saver’s Credit

Did you know that low to moderate income workers can take steps now to save for retirement and earn a special tax credit in 2016 and beyond? According to the Internal Revenue Service, saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs, 401(k), and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply. Taxpayers have until April 18, the due date for filing a 2016 tax return, to set up a new individual retirement arrangement or add money to an existing plan for 2016.

Savers credit can be claimed by married couples filing jointly with incomes up to $61,500 in 2016, heads of households with incomes up to $46,125 in 2016, and married individuals filing separately and singles with incomes up to $30,750 in 2016 or $31,000 in 2017. Like other tax credits, the saver’s credit can increase your tax refund or reduce the taxes that you owe. Though the maximum saver’s credit is $1,000, or $2,000 for married couples, the IRS cautions that it is often much less and may in fact be zero for some taxpayers. This can be affected by the impact of other deductions and credits. To be eligible for saver’s credit, you must be at least 18 years of age, anyone claimed as a dependent on someone else’s return cannot take the credit, and a student can not take the credit.

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