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Tax Season: Saver’s Credit

13 02 06 12 19

-------- Money for Nothing

If you or someone you know has an Adjusted Gross Income or less than 25,000, you may be eligible for a tax credit: Money to you put into a 401k, Individual Retirement Account (IRA), or other qualifying retirement accounts may bring you extra money from Uncle Sam. It can bring you 10%, 20%, or even 50% back – better refund or less tax payment! And that is on top of any Traditional IRA deductions you may have made, and the Adjusted Gross Income number is after such deductions.

It is a no brainier. In total, the government gives you money for saving money. They give you up to half of the money you are putting back; even you also get to keep the money for your retirement.

If you ever said: “I am too poor, I can’t afford to save”, now you really can’t afford not to save – you do not want to loose the opportunity to get more money.

And remember, you can always create an IRA with the refund money you get from the IRS. If you make your tax forms quickly enough, you can fund the IRA with the money they refund you.

Retirement savings credit guidelines (2005):

Income Limits	Married, joint filer	Head of household filer	Single, widow(er) or married separate filer income limits
$0 - 15,000	50%	50%	50%
$15,000 - 16,250	50%	50%	20%
$16,250 - 22,500	50%	50%	10%
$22,500 - 24,375	50%	20%	10%
$24,375 - 25,000	50%	10%	10%
$25,000 - 30,000	50%	10%	0
$30,000 - 32,500	20%	10%	0
$32,500 - 37,500	10%	10%	0
$37,500 - 50,000	10%	0	0

Notes: You must fill an extra form: 8880 and you must either use the 1040 or 1040A forms, you can’t use the 1040EZ. There is no marriage penalty on this credit, regardless of if you fill the forms jointly or separately it is the same as if both of you where single.

Other Articles on this important law:

• Savvy Saver
• Bank Rate