Retirement Savings Contributions Credit

You may have heard about the importance of having a retirement savings in place during your tax prep session. If not, shame on your tax preparer. Most may feel like that saving for retirement is just more money they are paying out, but there are advantages to paying yourself first. Here are some of the benefits of having an retirement account:

• You worked under the table a lot and didn't file taxes. You will have very little Social Security benefits if any at all.

• The earlier you save, the more retirement accounts can earn.

• You have the ability to manage in the even your children can't take care of you.

• YOU MAY RECEIVE A TAX CREDIT ON YOUR TAX RETURN!

Who's eligible for the credit?

You're eligible for the credit if you're:

1. Age 18 or older,

2. Not claimed as a dependent on another person’s return, and

3. Not a student.

You were a student if during any part of 5 calendar months of the tax year you:

• Were enrolled as a full-time student at a school, or

• Took a full-time, on-farm training course given by a school or a state, county, or local government agency.

Amount of the Credit

Depending on your adjusted gross income reported on your Form 1040 series return, the amount of the credit is 50%, 20% or 10% of:

• contributions you make to a traditional or Roth IRA,

• elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,

• voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,

• contributions to a 501(c)(18)(D) plan, or

• contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).

Rollover contributions do not qualify for the credit.

What is the Contribution Limit?

The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly).