The Retirement Savings Contribution Credit, also known as the Saver’s Credit, is a tax credit that you can claim if you have contributed during the year to a retirement plan sponsored by your employer or to your individual retirement account. It is worthwhile to take this credit if you qualify, but you should be aware of eligibility requirements before you try to take the credit on next year’s tax return.
What You Should Know about the Saver’s Credit
If you have made eligible contributions to an employer-sponsored retirement account or an IRA, then you may qualify to receive the credit of $1000, or $2000 if you are filing a joint return with your spouse. It’s also important to be aware of the qualifications that an individual must meet in order to receive the Retirement Savings Contribution Credit.
You must be at least 18 years of age or older, and you cannot be enrolled as a student full-time if you want to claim the credit. In addition, someone can’t claim you as a dependent on their return, and you must not exceed certain adjusted gross income limitations, either.
If you are filing a joint return with your spouse, as of 2012, your adjusted gross income cannot exceed $57,500 if you plan to take the credit on your income taxes. If you are filing as head of household, then the limit for you as of 2012 is $43,125. If you are filing your taxes under any other status, such as single, qualifying widow or widower, or married filing separately, then for 2012, the limit for your adjusted gross income is $28,750. If you exceed the amount, then you cannot take the Saver’s Credit on your taxes.
What Kinds of Retirement Contributions are Eligible?
Even if you meet all of the qualifications above, you should still make sure that the contributions you’ve made to your retirement account over the past year are eligible in the eyes of the IRS. Eligible contributions include any contributions to a Roth IRA or a traditional IRA, elective deferrals to a 401(k), a SIMPLE IRA plan, the federal Thrift Savings Plan, and a limited number of other plans. Check the official IRS website if you have any concerns about whether your retirement account qualifies.
There are, however, a couple of important points to remember. First, rollover contributions do not qualify for this tax credit. In addition, you should keep in mind that your eligible contributions could be cut by any distributions you may have recently received from an IRA or other retirement plan.