Saver’s Tax Credit 2015!
Do you know about the Saver’s Tax Credit?
Or, as it’s officially known (because the IRS abhors simple language) the Retirement Savings Contribution Credit?
If you’ve procrastinated filing your return (or don’t mind the trouble of filing an amended return), you still have time to take action that could slash your 2015 tax bill by as much as $4,000!
What’s the Saver’s Tax Credit?
The Saver’s Tax Credit (STC) is intended to encourage middle and low income Americans to contribute to tax-advantaged retirement accounts like 401(k)s and IRAs.
It’s simple: 1) make a contribution to a retirement account, and 2) if you’re eligible, take a tax credit.
Remember we’re talking about a credit here, not a deduction. Credits translate to a dollar for dollar cut in your tax bill. Deductions just reduce your taxable income, so they cut your taxes by only 15 cents for each dollar deducted, if you’re in the 15% marginal tax bracket.
Are You Eligible for the Saver’s Tax Credit?
Congress apparently decided the upper middle class and above don’t deserve or need encouragement to contribute to retirement accounts. So part of the eligibility for the STC is income-related.
You’re probably eligible for the STC if:
- Married filing jointly: 2015 income is less than $61,000
- Head of household: 2015 income is less than $45,750
- Married filing separately or single: 2015 income is less than $30,500
Besides these income limits, to claim the credit you must be at least age 18, can’t have been a full-time student in 2015, and aren’t claimed as a dependent on someone’s 2015 tax return.
What’s the Saver’s Tax Credit Worth?
For couples married filing jointly, the STC can cut their tax bill by up to $4,000. That’s huge!
For you bachelors and bachelorettes, the credit maxes out at a still sizable $2,000.
How Do You Qualify for the Saver’s Tax Credit?
If you’re eligible for the credit, qualifying is easy: contribute as much as you can to your workplace retirement plan OR to your IRA account.
Remember: you can make 2015 IRA contributions until April 18! So it’s not too late to set yourself up to claim this credit. You may get a big chunk of your contribution back in the form of a lower tax bill or bigger refund!
To learn whether you qualify for the STC, use the IRS’ nifty interactive tool: Saver’s Tax Credit Tool