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Tax Tips for February 2013
by Gil Debner, CPA
Savers’ Credit. This credit can be claimed by single filers and marrieds filing separately having incomes up to $ 28,750 in 2012 or $ 29,500 in 2013. Heads of Household filers with income up to $42,125 in 2012 and $44,250 in 2013. For married single filing jointly with incomes up to $45,125 in 2012 and $44,250 in 2013. Also for married couples filing jointly with incomes up to $57,500 in 2012 and $59,000 in 2013.
The saver’s credit helps offset part of the first $2,000 that workers voluntarily contribute to IRAs, 401 (K) plans and similar workplace retirement plans. The saver’s credit is available in addition to any other tax savings that apply to the taxpayer. This credit is also known as the retirement savings contribution credit.
Taxpayers eligible still have time to make qualifying retirement contributions and get the saver’s credit on their 2012 tax return. But this applies to people that set up a new IRA (individual retirement arrangement) or add money to an existing IRA. The contribution may be made until April 15, 2013. For those individuals that have electric deferral (contributions), the money must have been contributed by December 31, 2012 to a 401(K) plan or similar workplace programs or 403(b) plans for employees of public schools as well as certain tax exempt organizations, a government 457 plan for state or local government workers and the Thrift Savings Plan for federal government employees. If you missed the deadline for 2012, or are unable to set aside money for 2012, you may want to do some tax planning to take advantage of the credit for 2013.
As you may know, the saver’s credit can reduce the tax owed or increase your refund. Be advised that the credit tops out at $1,000 for single filers and $2,000 for married couples. The IRS says the credits are usually less than the maximum because of other deductions and credits. In fact, sometimes the credit is zero.
Factors affecting the credit are (1) filing status (2) adjusted gross income, (3) the tax liability and (4) the amount contributed to the qualifying program.
Additionally, the tax payer must be 18 years or older, anyone claimed as a dependent on someone else’s return cannot take the credit. A student cannot take the credit (a person enrolled as a full-time student during any part of five (5) calendar months during the year is considered a student.
For any other circumstances, consult your tax advisor, or study the instructions for Form 8880 to make the computation for your classification.
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