A taxpayer with low to moderate income who is saving for retirement may be able to take a tax credit, per the IRS.
The Saver's Credit is in addition to the savings a UU Retirement Plan participant realizes when they reduce their taxable income by authorizing pre-income-tax salary-reduction contributions (also known as Elective contributions).
Why Would I Care?
A tax credit is one of the fastest ways to lower income taxes, since each dollar of credit reduces the federal income tax an employee owes by one dollar.
How Much Might I Get?
If you qualify, the maximum credit is capped at $2,000, or $4,000 if married filing jointly. The IRS chart shows the maximum income level for various filing statuses. Use that chart to calculate your credit.
Filing for the Credit
See IRS Form 8880 (PDF) to determine your credit rate.
Who is Eligible?
You may be eligible for the credit it you are making voluntary contributions to the UU Retirement Plan, or certain other qualified plans designated in the IRS information. You must be:
- Age 18 or better, and
- not a full-time student, and
- not claimed as a dependent on another person's return, and
- not have AGI of more than the limits set in the IRS chart (link above)
Does Everyone Qualify?
The Saver's Credit is meant to provide those with low and moderate incomes with an incentive to save. The strict income limits and related details are included on the IRS form and chart links above.
- Ministers' AGI does not include the amount designated as their clergy housing allowance, and thus, to their surprise, a minister may find that they are eligible for the Saver's Credit.
Remember:
- If you qualify and don't apply, you are leaving money on the table.
- Dependents, full-time students, and people under age 18 are not eligible for the Saver's Credit.
- Only voluntary contributions are considered. Employer's contributions cannot be claimed toward the Saver's Credit.
- The Earned Income Credit (EIC) and the Savers Credit can be simultaneously claimed.
- The UUA does not offer tax advice. The information provided here is summarized, and participants are urged to review the source of this information, which is the IRS website linked above.