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IRS Is Rewarding Retirement Savers With Up to $2,000 — are You Eligible?

If you’re seeking to boost your tax benefits this year, don’t overlook the Saver’s Credit.

Formerly known as the Retirement Savings Contribution credit, this tax break is available to low- and moderate-income earners who tuck away money for retirement. You can get a credit worth as much as $2,000 if you’re filing your tax return as a married couple ($1,000 if filing single). The Saver’s Credit can come in handy if you’re trying to reduce or wipe away your tax bill.

You won’t be eligible for the Saver’s Credit if your income tips over a certain threshold. We’ll break down the rules, so you can take advantage of this credit if you qualify.

Don’t miss out on this retirement savers’ perk

The latest Transamerica Center for Retirement Studies report shows that many Americans are leaving money on the table. Out of more than 5,800 workers surveyed, only 46% are aware that the Saver’s Credit exists. You may be in the running to take advantage of this credit if you are 18 or older, not a full-time student, or listed as a dependent on another person’s tax return.

The Saver’s Credit is a tax perk you should know about if you think you’ll owe money during tax time. This credit can reduce your tax bill dollar-for-dollar, reducing your tax burden for the year. It ends up being a better deal than a deduction on your tax return. However, the Saver’s Credit is nonrefundable, so you won’t be eligible for a refund if your tax credit is worth more than your tax liability. This credit can only drop your tax bill to zero, and not a penny beyond that.

Take the Saver’s Credit test to determine if you’re eligible

Your adjusted gross income (AGI) will determine if you are eligible for the Saver’s Credit during the 2022 tax year — the one for which your return is due by April 2023. For example, if you are married filing jointly, you won’t be eligible for the credit if AGI exceeds $68,000. If you make too much money, you’ll have to hunt for other tax breaks that can reduce your tax liability.

Depending on your filing status and which income bucket you fall in, your tax benefit will be limited to the 50%, 20%, or 10% credit rate for retirement account contributions. Only qualifying contributions made to a 401(k), IRA, ABLE, or other approved accounts will qualify.

Take a look at the 2022 income ranges and credit rates based on your filing status to see if you qualify for the 2022 Saver’s Credit.

Amount of your tax credit

based on income and filing status

Married Filing Jointly

(AGI)

Head of Household

(AGI)

All Other Filers

(AGI)

50% of your contribution $0 to $41,000 $0 to $30,750 $0 to $20,500
20% of your contribution $41,001 to $44,000 $30,751 to $33,000 $20,501 to $22,000
10% of your contribution $44,001 to $68,000 $33,001 to $51,000 $22,001 to $34,000
0% of your contribution Over $68,000 Over $51,000 Over $34,000
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