If you meet the criteria, you can claim up to a 50% credit for contributions to a qualifying retirement savings account(a.k.a Saver’s Credit). I’ve used it in the past and if everything falls into place this year, I might qualify again. It’s gonna be close though.
Here’s how you qualify.
- You’ve got to have been born before January 2, 1988.
- You are not a full-time student.
- No one can claim you as a dependent
- Your adjusted gross income is not more than
- $50,000 if married filing jointly
- $37,500 if head of household
- $25,000 if married filing separate, filing single or qualifying widow with dependent child
It’s pretty obvious by those standards that while many will qualify, few will take advantage of it. The problem is that you need to be making very little to qualify. That is the point of the credit. To get the lower income families to contribute to retirement savings and lessen the load on Social Security, welfare, medicare, etc…
Now, what contributions are eligible?
All contributions to a traditional IRA, Roth IRA, 401(k), SIMPLE 401(k), 403(b) annuity, governmental 457 plan, SIMPLE IRA, salary reduction SEP, and a 501(c)(18) plan are deductible. That pretty much covers everything.
The deduction ranges from 10% to 50% and is tied to your AGI. You can refer to IRS Form 8880to see the full table of AGI’s and their respective deduction %’s.