We all know it can be tough to find the money to put away for retirement with how expensive life is today. Being a saver isn't always fun, but it can really pay off in the long run.
Fortunately, when it comes to tax time being a saver isn't all that bad. We know that what we contribute to most retirement plans is deducted from your earned income. In addition to that there is a saver's credit that can apply if you're under certain thresholds for your income. This applies if you contribute to work plans like a 401k or SIMPLE or if you contribute to your own Roth or Traditional IRA.
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2016 Saver's Credit |
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Credit Rate |
Married Filing Jointly |
Head of Household |
All Other Filers* |
|
50% of your contribution |
AGI not more than $37,000 |
AGI not more than $27,750 |
AGI not more than $18,500 |
|
20% of your contribution |
$37,001 - $40,000 |
$27,751 - $30,000 |
$18,501 - $20,000 |
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10% of your contribution |
$40,001 - $61,500 |
$30,001 - $46,125 |
$20,001 - $30,750 |
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0% of your contribution |
more than $61,500 |
more than $46,125 |
more than $30,750 |
As you can see, you can receive a credit anywhere from 10% - 50% of your contributions. This can take up to $2,000 (or $4,000 if married) right off your final tax bill! Meaning more retirement savings for you and less of your money to the government; that’s a good deal.
So, make sure you're on the lookout for this if you're filing your own taxes. On the other hand, if you're on the fence about putting more into your retirement account hopefully this will give you a little extra incentive to contribute more.
*Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.