Do You Qualify for the Saver’s Credit?

September 22, 2017

Death and taxes. We’ve all been told that those are the only two inevitabilities in life. While you know full well that Father Time is undefeated, Uncle Sam also has a pretty impressive record when it comes to impacting your financial life. Setting aside funds to meet your annual tax liability can make saving for other important things (like your retirement) really difficult, especially if you are of modest means. Yet at the same time, no one (including the government) wants to see a senior demographic that’s struggling to make ends meet. Thus, when you sit down to do your annual Los Angeles tax preparation, pay close attention to whatever credits might be available due to your retirement savings.

Tax Benefits Due to Retirement Savings

One credit that’s definitely worth looking into is the Saver’s Credit. This allows you to potentially reduce your federal tax liability to $0 simply by you making contributions to a 401, 403(b), 4579(b) or IRA plan. Through the Saver’s Credit, you can defer 10, 20 or 50 percent of the first $2000 you contribute to a retirement savings account. What percentage you can defer depends on both your annual income and your filing status. The income limits for each status are shown below:

Single:

• $0-$18,000: 50%

• $18,501-$20,000: 20%

• $20,001-$$31,000: 10%

Head of Household:

• $0-$27,750: 50%

• $27,751-$30,000: $20%

• $30,001-$46,500: 10%

Joint:

• $0-$37,000: 50%

• $37,001-$40,000: 20%

• $40,001-$62,000: 10%

The Saver’s Credit typically ranks among the most under-utilized tax credits, with TurboTax reporting that only 12 percent of Americans with annual incomes less than $50,000 knowing about.

Get Help in Finding Available Tax Credits

People are often perplexed about the many tax benefits available to them that they simply don’t know about. That’s understandable given that without the assistance of professional Encino tax consultants, comprehending the tax code is virtually impossible. Luckily, you have us here at Wallace & Associates to rely on. Our knowledge of both retirement planning and tax benefits can help ensure that as much of your extra income as possible goes towards securing your future. To see why we’re credited for being among the best CPA firms in Los Angeles, call us today at 818.995.2928.