There is a tax credit many American’s are unaware of. We all knew about the First Time Home Buyers credit and the Cash for Clunkers plan but what about the Saver’s credit? This credit is specifically for low to middle income people who contribute to retirement plans such as IRAs and 401Ks. These people can claim up to $2,000 per couple if they contribute to a retirement plan and the credit is equal to the credit rate times the amount of contributions up to $2,000.
As any tax credit, there are limitations and this one is actually a bit complicated. Couples who file jointly must have adjusted gross income of less than $55,500, head of house less than $41,625, and other tax payers less than $27,750. Among some of the other limitations include that filers may not use a 1040 EZ, which most low income people do, and may not be claimed as a dependent or student under any other tax payer. This tax credit is also nonrefundable which proves it to have limited value for little to no income tax liability but people who do qualify for the saver’s credit can get in addition to tax deductions.
This is a tax credit that can be beneficial to many qualifying people who don’t even know it exists as it hasn’t had much of any promotion. In 2008, only 4% of Federal tax returns claims the Saver’s credit, a total that amounts to just under $1 billion compared to the $4.4 billion for the First Time Home Buyer’s credit. In addition, a study found that only 12% of Americans with income less than $50,000 are aware of the credit! So let’s spread the word to our clients, referrals, friends and family to help out someone who may need it.
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