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How the IRS Saver's Credit may help you save for retirement and now
How the IRS Saver's Credit may help you save for retirement and now
Updated over a week ago

If you’re part of the majority of Americans living paycheck-to-paycheck, then saving for retirement might be the furthest thing from your mind. Fortunately, the IRS may offer relief to help you save now for retirement.

The Saver’s Credit allows eligible taxpayers to claim a tax credit for contributions made to an employer-sponsored or individual retirement plan, such as a 401(k) or IRA.

A tax credit, unlike a tax deduction, offsets dollar for dollar the taxes you would normally pay, that in this case can be carried over if you don’t pay enough taxes. This credit provides an additional advantage on top of the tax break you already get from your tax-preferred retirement accounts.

You may be eligible for the credit if you are:

  • Age 18 or older

  • Not a full-time student

  • Not claimed as a dependent on someone else’s tax return

The amount of credit you qualify for depends on your adjusted gross income (AGI). The maximum credit you can claim is 50% of $2,000 in contributions for singles and $4,000 for married couples, making the maximum credit $1,000 ($2,000 if married filing jointly). Check out the IRS table to determine how much of a credit you might be eligible to receive based on your AGI.

If you qualify for the Saver’s Credit, you’ll essentially get a bonus reduction on taxes you would otherwise owe, as a reward for contributing toward your retirement.

This information is for general education purposes only and not intended to be tax advice. We encourage you to consult a qualified tax professional before requesting a distribution.

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