In a bid to empower low- and moderate-income taxpayers, the Internal Revenue Service (IRS) is urging individuals to kickstart their retirement savings now, offering a unique opportunity to claim a special tax credit in 2024 and beyond.
Saver’s Credit: Your Key to Financial Wellness
The Retirement Savings Contributions Credit, commonly known as the Saver’s Credit, is designed to offset a portion of the first $2,000 voluntarily contributed by workers to Individual Retirement Arrangements (IRAs), 401(k) plans, and similar workplace retirement programs. This credit extends its support to eligible individuals with disabilities contributing to an Achieving a Better Life Experience (ABLE) account. For more information on ABLE accounts, consult Publication 907, Tax Highlights for Persons With Disabilities.
Maximize Your Returns: Up to $1,000 Credit ($2,000 for Couples)
The Saver’s Credit presents an opportunity to enhance your tax refund or reduce owed taxes. However, it’s important to note that other deductions and credits influence the credit. Contributions to retirement plans or ABLE accounts may impact the calculated credit amount.
Mark Your Calendar: Contribution Deadlines
For individuals with IRAs, the deadline for setting up a new IRA or adding funds to an existing one for the tax year 2023 is April 15, 2024, coinciding with the deadline for filing 2023 tax returns. Both Roth and traditional IRAs qualify for this benefit.
Workplace retirement plan participants still have time to make qualifying contributions. Elective deferrals to workplace retirement plans, such as 401(k) plans, 403(b) plans, Governmental 457 plans, and Thrift Savings Plans (TSP), must be made by December 31.
Eligibility Criteria: Who Qualifies?
To be eligible for the Saver’s Credit, individuals must be 18 years or older, not claimed as a dependent, and not a full-time student. Income limits apply based on adjusted gross income and marital or filing status. For 2023, the income limits are as follows:
- Married couples filing jointly with adjusted gross incomes up to $73,000.
- Heads of household with adjusted gross incomes up to $54,750.
- Married individuals filing separately and singles with adjusted gross incomes up to $36,500.
Taxpayers can utilize the Interactive Tax Assistant tool for the Saver’s Credit to assess their eligibility and potential benefits.
Source (IRS News).
