Take Full Advantage of the Saver’s Tax Credit

If you elected to save for your retirement in our 401(k) plan, you may be eligible to claim a special tax credit of up to $1,000.  In order to qualify for the Saver’s Credit you must be:

 

§  18 year of age or older

§  Not a full-time student

§  Not claimed as a dependent on someone else’s return

 

In addition, you must meet one of the following financial criteria:

§  File your taxes singly with an income of $27,750 or less.

§  File your taxes as head of household and have an income of $41,625 or less.

§  File your taxes jointly with an income of $55,500 or less.

 

The tax credit ranges from 10 to 50 percent of each $1.00 you contribute, up to the first $2,000 you put in your 401(k).  That’s between $200 and $1,000 directly off the income taxes you pay.  If you and your spouse both contribute to a 401(k) plan, you may combine your contributions as joint filers, or report separately as single filers.  The amount of your tax credit depends on the amount of your adjusted gross income.  The income limits and applicable credit rate allowance are given in the table below.

 

The tax credit is in addition to other favorable tax treatments for your 401(k) participation, such as the deferral of income tax on your contributions.  Please note that this credit applies only as a reduction to your income tax liability, not as cash in hand via a refund.

 

To take advantage of the Saver’s Credit, you or your tax preparer will need to include Form 8880, Credit for Qualified Retirement Savings Contributions, when you file your tax return.  The government has established this program because it wants to reward low- and moderate-income workers who save for retirement. 

 

Tax Credit for Different Income Levels

	Adjusted Gross Income
Credit	Single Filers	Head of Household	Joint Filers
50% of Contribution	0 - $16,750	0 - $25,125	0 - $33,500
20% of Contribution	$16,751 - $18,000	$25,126 - $27,000	$33,501 - $36,000
10% of Contribution	$18,001 - $27,750	$27,001 - $41,625	$36,001 - $55,550
Credit not available	More than $27,750	More than $41,625	More than $55,500

This is for general information only.  Please consult your tax advisor for more information.