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Who can earn the retirement tax credit?

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in Small Business Tax

Q: In a recent Mail Call, you correctly answered a reader by saying that a tax refund would not be reduced by a Roth IRA contribution. (8/11/03 issue) But in stating that Roth IRA contributions don't affect current tax liability, aren't you omitting the use of the retirement tax credit? M.A.C., Union Beach, N.J.

A: You are correct, but the credit doesn't apply to higher-income people. Here's the deal: The retirement saver's tax credit, which first became available in 2002, is equal to a percentage of a taxpayer's IRA or Roth IRA contribution. The percentage is 50 percent, 20 percent or 10 percent, depending on the taxpayer's income. But the ceiling is set pretty low; no credit is available to people with a modified adjusted gross income above $50,000. A high-income individual asked the particular question you referenced.

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