Low- and moderate-income workers can earn a special tax credit for 2013 that will help them also save for retirement, the Internal Revenue Service said.
The so-called “saver’s credit” partially offsets the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and other similar employer retirement programs.
The saver’s credit is available in addition to any other tax savings that apply.
But, the IRS makes a point to say that the credit is limited and carries certain requirements.
In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns.
The credits claimed on these returns ave raged $215 for joint filers, $166 for heads of household and $128 for single filers.
The saver’s credit can be claimed by:
- Married couples filing jointly with incomes up to $59,000 in 2013 or $60,000 in 2014;
- Heads of Household with incomes up to $44,250 in 2013 or $45,000 in 2014; and
- Married individuals filing separately and singles with incomes up to $29,500 in 2013 or $30,000 in 2014.
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return.
You have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013.
However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.
Employees who are unable to set aside money for this year may want to schedule their 2014 contributions soon so their employer can begin withholding them in January.