IRS Releases Updated Form for Claiming the Saver's Tax Credit
The IRS released the 2013 version of IRS Form 8880, Credit for Qualified Retirement Savings Contributions. The form is used to claim a federal income tax credit, known as the “saver’s credit,” if you make IRA contributions or certain salary deferral contributions to your company’s retirement plan, such as a 401(k) plan. The credit is a financial incentive to save for your retirement. However, not everyone who makes an IRA or other retirement plan contribution will qualify.
To get the credit, you must meet certain rules/guidelines. Your income must be below certain limits to qualify. For example, if you are married filing jointly, your adjusted gross income (AGI) must be below $35,500 (or $17,750 for singles) to qualify for the full credit amount. If your AGI is above these AGI levels, then the credit phases out (reduces).
The maximum amount of the credit is $1,000 (or $2,000 if you file jointly and both qualify). If you qualify, the amount of the credit will reduce the federal income taxes you owe, dollar for dollar. It can even be used to reduce taxes if you are subject to the alternative minimum tax (AMT). For example, let’s say that after your federal income taxes for 2013 are calculated, you or your tax preparer initially figure that you owe $3,500 in income taxes, but you qualify for a $1,000 saver’s credit because you made an IRA contribution. You simply subtract the credit from the taxes, which results in you owing $2,500 to IRS (i.e., $3,500 - $1,000 saver’s credit = $2,500).
The credit is available if you make IRA contributions, Roth IRA contributions, SIMPLE IRA salary deferrals, and even 401(k) deferrals. Also, you can still get the credit even if you get an income tax deduction for making your IRA contribution.
- By Joe Cicchinelli and Jared Trexler
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