Saver’s Tax Credit for IRA’s

Are you eligible for a tax credit when you contribute to your retirement plan?

Certain lower income contributors to various tax-advantaged
plans—IRAs, 401(k) plans, 403(b) tax sheltered annuities, SIMPLE IRAs, Section
457 governmental plans and salary reduction SEPs—receive a nonrefundable tax
credit in addition to any other tax benefits resulting from participation. The
tax credit, being nonrefundable, applies only to the extent the client has an
income tax liability. Thus, a client with no federal income tax
liability—despite otherwise being eligible for a Saver’s Tax Credit—would not
receive it.

The tax credit is equal to the applicable percentage shown
in the following chart multiplied by the total qualified retirement savings
contribution, reduced by distributions received from such plans during the prior
two taxable years. The maximum Saver’s Tax Credit for any individual is $2,000.

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