According to The Motley Fool, planning for retirement can be challenging, but the Saver’s Credit offers valuable assistance for low- and moderate-income taxpayers. For 2024, contributions to a qualified retirement plan, such as a 401(k) or Roth IRA, could earn a tax credit of up to $2,000. Unfortunately, only 47% of U.S. workers are aware of this credit, which reduces the amount of taxes owed but does not provide a refund if the credit exceeds the tax bill. Understanding and meeting the requirements is essential to fully benefit from this opportunity.
To claim the Saver’s Credit, you must be at least 18 years old, not claimed as a dependent, and not a full-time student. Contribute to a qualified retirement account (401(k), 403(b), IRA, or Roth IRA) by December 31, 2024 (for employer-sponsored plans) or April 15, 2025 (for IRAs). The annual contribution limits are $7,000 for those under 50 and $8,000 for those 50 and older. Meeting these criteria allows you to claim the Saver’s Credit and enjoy tax benefits while growing your retirement savings.
Income Thresholds for Maximizing the Saver’s Credit
The percentage of the Saver’s Credit you can claim depends on your income, with thresholds set at 50%, 20%, and 10% of your contributions. For example, married couples filing jointly can receive a 50% credit if their adjusted gross income (AGI) is up to $46,000, a 20% credit for AGIs between $46,001 and $50,000, and a 10% credit for AGIs between $50,001 and $76,500. If your AGI exceeds these thresholds, you won’t qualify for the credit. Monitoring your income throughout the year and understanding these thresholds is crucial to maximizing your tax savings and bolstering your retirement funds, thereby securing your financial future.