It isn't every
day that workers get a tax credit when they invest for retirement. Yet thanks
to the Economic Growth and Tax Relief Reconciliation Act of 2001, retirement
plan participants who meet thresholds for adjusted gross income (AGI) may be
able to do just that.
The "Saver's Credit" takes effect for the 2002 tax year and expires
after 2006. It enables taxpayers who meet the AGI thresholds detailed below
to claim a tax credit for the first $2,000 ($4,000 for taxpayers filing jointly)
that is invested in an employer-sponsored retirement plan or an individual retirement
account. The amount of the credit that can be claimed ranges from 10% to 50%
of the contribution, up to a maximum of $1,000 (50% of $2,000) per taxpayer.
Whether you can claim the credit - and the amount you may be able to claim -
depends on a variety of factors, including your filing status and whether you
take any retirement plan distributions during a given tax year. The credit is
available to individual's age 18 and older, but not to full-time students or
individuals claimed as dependents on another taxpayer's return.
A tax advisor can help you determine whether claiming the Saver's Credit is
appropriate for your situation. Investing money for your retirement - and claiming
a tax credit for doing it - could provide a double benefit that's hard to beat.
The Saver's Credit could work for you if you meet the following adjusted gross income (AGI) thresholds. The credit amount below assumes the taxpayer contributed $2,000. Separate limits apply to individuals whose filing status is head of household.
Filing Status |
Adjusted
Gross Income |
Credit |
| Single or Married filing separately |
$15,000 or less |
50% or $1,000 20% or $400 10% or $200 Don't qualify |
Married Filing Jointly* |
$30,000 or less |
50% or $2,000 20% or $800 10% or $400 Don't qualify |
*Assumes both taxpayers make a $2,000 contribution