If you contribute to a retirement plan, like a 401(k) or an IRA, you may be able to claim the Saver’s Credit. This credit can help you save for retirement and reduce the tax you owe. Here are some key facts that you should know about this important tax credit:
• Formal Name. The formal name of the Saver’s Credit is the Retirement Savings Contribution Credit. The Saver’s Credit is in addition to other tax savings you get if you set aside money for retirement. For example, you may be able to deduct your contributions to a traditional IRA.
• Maximum Credit. The Saver’s Credit is worth up to $2,000 if you are married and file a joint return. The credit is worth up to $1,000 if you are single. The credit you receive is often much less than the maximum. This is due in part because of the deductions and other credits you may claim.
• Income Limits. You may be able to claim the credit depending on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2014 tax return if you are:
o Married filing jointly with income up to $60,000
o Head of household with income up to $45,000
o Married filing separately or a single taxpayer with income up to $30,000
• Other Rules. Other rules that apply to the credit include:
o You must be at least 18 years of age.
o You can’t have been a full-time student in 2014.
o No other person can claim you as a dependent on their tax return.
• Contribution Date. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2014. The due date for most people is April 15, 2015.
• Form 8880. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit.
• Free File. If you can claim the credit, you can prepare and e-file your tax return for free using IRS Free File. The tax software will do the hard work for you. It will do the math and complete the right forms. Free File is available only through the IRS.gov website.