Save Now, Benefit Later
The most recent Brookings Institute Report highlights downward economic mobility trends in low and moderate income African American families across the nation. To begin to address these growing economic disparities a broader community conversation and advocacy agenda expressly focused on economic equality is needed. In the interim, one option to start rebuilding the savings working class families lost during the economic crisis is to take advantage of some of the tax breaks and incentives offered to those who save. One such opportunity is the saver’s tax credit. This tax credit provides a special tax break to low- and moderate-income workers who are saving for retirement. The saver’s tax credit may increase your tax refund or reduce the amount of tax you owe. The maximum credit is $1,000, or $2,000 for married couples.
The saver’s tax credit can be claimed on the first $2000 you contribute to your Roth IRA, Traditional IRA, 401(k), 403(b), or 457 plan. If you have not started saving yet, you must make a contribution by the end of the year to your 401(k), 403(b), or 457 plan. However, you have until April 15, 2016 to set up a new IRA or add money to an existing IRA.
You may be eligible for the saver’s tax credit if you are:
- Single or married person filing separately with an income up to $30,500.
- Head of Household with an income up to $45,750.
- Married couple filing jointly with an income up to $61,000.
- You are at least 18 years of age.
- Were not a full-time student in 2015.
- Were not claimed as a dependent on another person’s tax return.
To claim this tax credit, attach Form 8880 to your tax return (Form 1040, 1040A, or 1040NR). For more information about the saver’s tax credit visit www.irs.gov/form8880
Written by Chereese Phillips
Chereese Phillips earned her doctorate from the University of Pittsburgh. Currently employed in local government, her primary interests are in personal finance and wealth building. With a goal of increasing savings and asset accumulation among low and moderate income individuals.