Another Way to Save: New Tax Credit for Plan Participants
According to a Transamerica Center for Retirement Studies (TCRS) report fewer than four in ten U.S. workers know about a tax credit that may help them save for retirement, per the IRS. The Saver's Credit is available to eligible taxpayers who are saving for retirement.
The Saver's Credit is a non-refundable tax credit, and can be applied up to the first $2,000 of a participant’s contributions to a retirement plan The maximum credit is $1,000 for a single filer and $2,000 for married couples filing jointly. In addition to the tax-advantages of saving for retirement in a 401(k), 403(b) or IRA, the Saver's Credit is an added benefit to reduce federal taxes.
This credit is available to workers ages 18 years or older who have contributed to a retirement plan in the past year and meet the Adjusted Gross Income (AGI) requirements:
- Single tax filers with an AGI of up to $32,000 in 2019 or $32,500 in 2020 are eligible;
- For the head of a household, the AGI limit is $48,000 in 2019 or $48,750 in 2020; and,
- For those who are married and file a joint return, the AGI limit is $64,000 in 2019 or $65,000 in 2020.
- Please note, the filer cannot be a full-time student and cannot be claimed as a dependent on another person's tax return.
Participants who are eligible to claim the Saver's Credit are often also eligible to take advantage of this program that offers federal income tax preparation software for free to tax filers earning $69,000 or less. Ten companies make their tax preparation software available through this program at www.irs.gov/FreeFile, though certain restrictions may apply.
Individuals who are eligible but did not save last year can still contribute to an IRA until April 15, 2020, and may be able to claim the Saver's Credit for the tax year 2019.
To learn more about the Saver’s Credit, contact your plan advisor.
ACR# 343335 03/20