• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

Bolster retirement savings with little-noticed credit

by on
in Small Business Tax,Small Business Tax Deduction Strategies

In these trying economic times, young adults may find it difficult to save for retirement.

Strategy: A little-noticed tax break can provide a big boost to lower wage-earners.

The amount of the available credit depends on adjusted gross income (AGI), tax filing status and contribution amount.

Here’s the whole story: The retirement saver’s credit is applied to the first $2,000 of voluntary contributions made to a tax-qualified retirement plan such as a 401(k) or an IRA. Although greater contributions are permitted, the maximum amount allowed for the credit remains $1,000 ($2,000 for joint filers).

The credit may be equal to 50%, 20% or 10% of the qualified contribution, depending on the saver’s income bracket (see chart below). Once the income level for the 10% credit is exceeded, you can’t claim any credit. Other restrictions may apply. For instance, the credit can’t be claimed by a taxpayer who was under age 18 last year, a full-time student or a child who can be claimed as a dependent on someone else’s tax return.

Tip: This credit is nonrefundable. Thus, it may reduce your tax bill to zero, but you can’t claim a refund for any excess credit amount.

Like what you've read? ...Republish it and share great business tips!

Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...

We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.

The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.

" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/30597/bolster-retirement-savings-with-little-noticed-credit "

Leave a Comment