Did you know that you may be able to get an income tax credit simply for contributing to an employer-sponsored retirement plan, or to an IRA? This is over and above the tax deduction that you may get for making such contributions. Too good to be true? I think not.
This (potentially) valuable tax credit is known as the “Retirement Savings Contribution Credit, ” and it’s available to anyone who meets the income requirements and makes a qualifying retirement contribution.
For tax year 2009, you can claim this credit if you AGI is no more than:
- $55, 500 (married filing jointly),
- $41, 625 (head of household), or
- $27, 750 (single, married filing separately, or qualifying widow[er])
The credit ranges from 10% to 50% of your contribution amount, and the maximum contribution on which the credit is calculated is $2000. In other words, you can get a credit of up to $1000. The actual rate can be determined by completing IRS Form 8880.
Eligible retirement plans/accounts include a traditional or Roth IRA, or elective deferrals to a 401(k), 403(b), 457(b), SIMPLE IRA, or a salary reduction SEP-IRA. Contribution to a 501(c)(18) plan are also eligible.
And guess what? It’s still not too late to take advantage of this tax credit for 2009. Even if you haven’t made any retirement contributions, you can still fund a traditional or Roth IRA up through the day your taxes are due. So what are you waiting for? Get cracking!
See Chapter 5 of IRS Publication 590 for complete details.