Earlier this week, we discussed how many Americans owe more money in debt than they have saved for retirement: if you are one of the savers, or just need a little motivation to start contributing to a retirement plan, the federal government has a credit designed just for you! It’s called the Retirement Savings Contribution Credit, or Saver’s Credit.
If you or your employer makes eligible contributions to a retirement plan, you may be able to take a credit of up to $1,000 (up to $2,000 if married and filing jointly).
Here’s how it works, from IRS.gov:
Can you claim the credit? If you or your employer make eligible contributions to a retirement plan, you can claim the credit if all of the following apply.
Full-time student. You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either:
Eligible contributions. These include:
They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or a section 403(b) annuity. For purposes of the credit, an employee contribution will be voluntary as long as it is not required as a condition of employment.
So there you have it, straight from the IRS’s mouth. Of course, there are several technical requirements and nuances that you may need to consider first, including reducing your eligible contributions, distributions received by a spouse, maximum eligible contributions, effects on other credits, and much, much more.
If you’d like an interpretation or analysis of how you might make this work for you, click here to contact us at Rodefer Moss.