Tax Deductions and Credits For Retirement Savings

If you are a middle to low income earner, you can earn tax credits for depositing money into an IRA or 401K plan. The Retirement Savings Contribution Credit will give you a tax credit of up to 50% of the money you deposit, depending on your income.


If you are married and filing jointly with an income under $32,000 annually, you qualify at 50% of your annual investment. If you are married and filing jointly with annual income above $32,000, but below $34,500, you qualify at 20% of your deposits. If you are married and filing jointly with an income below $53,000, but above $34,500, you qualify at 10% of your investments.


If you are single and earn under $16,000 annually, you qualify at 50% of your
deposited amount. If you are single and earn less than $17,250 annually, but more
than $16,000, you qualify at 20% of your invested dollars. If you are single and
make more than $17,250 annually, but less than $26,500, you qualify for a 10% tax
credit.

If you are the head of household and earn less than $24,000 annually, you qualify
at 50% of your invested money. If you are head of household and earn more than $24,000 each year, but less than $25,875 annually, you will qualify at 20% of what
you have deposited. If you file as head of household and earn more than $25,875,
but less than $39,750, your tax credit will be 10% of what you deposited.


There is a maximum credit of $1000, so if you were able to make a generous contri-
bution to your retirement account, you may not qualify for the full deduction.
Contributing to a pre-tax retirement fund is a great way to save money on taxes now
, whether you qualify for the Retirement Savings Contribution Credit or not, because
none of the money is taxable going in.


It is recommended that you consider consulting with a tax professional and have
them file your return. Filing an income tax return can ordinarily be a bit confusing
, but due to all the tax restrictions and qualifications associated with retirement
savings, your next filing could prove more difficult than it usually is if you have
invested in retirement savings. Tax professionals are trained on all the changes to
the code and will know which ones will benefit you and exactly how you do or do not
qualify to take advantage of them.


Right from the start of your career, you should plan for your retirement. Fortunately there are various tax credits and deductions available.

What are they and how to claim them on your tax return? Chintamani Abhyankar explains ..
Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous Tax eBook "Stop donating your money to IRS" which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.
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