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Saver’s Credit: Taxpayers Can Receive Up to $2,000 Credit

Saver's Credit
Up to $2,000 Credit can be receieved through Saver's Credit. (Photo: GoBankrate)

Taxpayers still have time to reduce their tax bill for the current year through the Saver’s Credit intended to help qualified low-and moderate-income savers.

Saver's Credit

Up to $2,000 Credit can be received through Saver’s Credit. (Photo: Bankrate)

Saver’s Credit

The Saver’s Credit is a little-known tax benefit that allows qualified low- and moderate-income savers to receive a credit worth up to $1,000 if filing single and $2,000 if married and filing jointly. The credit can be applied to your tax bill and can only drop your tax bill to zero, it won’t result in a tax refund.

In a published article in The Motley Fool, to qualify for the Saver’s Credit, one needs to contribute to a qualifying retirement account, such as a Roth IRA. The Roth IRA is a retirement account funded with after-tax dollars.

Contributions made to the Roth IRA can only be withdrawn tax-free when the account holder is 59 1/2 years old and has met the five-year rule. Roth IRAs do not require holders to withdraw money at any particular age, unlike traditional IRAs

READ ALSO: Federal Insurance Contribution Funds Taxpayers’ Social Security And Medicare

Eligibility for the Saver’s Credit

To be eligible for the Saver’s Credit, you must be at least 18 years old and not claimed as a dependent on someone else’s tax return. Also, you cannot be a student. The amount of credit you receive depends on your filing status and adjusted gross income (AGI) for the year. The Saver’s Credit offers three categories of credits, 50%, 20%, and 10%, and the maximum credit amount that you can receive is determined by your filing status and AGI.

Married couples filing jointly with a combined AGI of $40,000 and who contribute $2,000 to a Roth IRA can claim a 50% credit of $1,000 for their $2,000 IRA contribution on their 2022 tax return. Taxpayers who are considering contributing money to a Roth IRA have until the tax deadline to decide. For 2022, the maximum contribution limit to a Roth IRA is $6,000 for those under 50 years old and $7,000 for those who are 50 and over, according to Smart Asset.

The Saver’s Credit is a great way for taxpayers to save money on their tax bills, and they should not miss the opportunity to receive it. Although the credit is not well-known, taxpayers can take advantage of it by contributing to a qualifying retirement account, such as a Roth IRA, and by checking to see if they qualify for the credit.

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