The U.S. House of Representatives passed a retirement reform bill>What is the saver's credit?
Only 48% of tax filers are aware of the tax credit, according to a 2021 Transamerica Center for Retirement Studies poll. Of those that earn less than $50,000 per year, just 41% have heard of it.
The saver's credit offers a tax break for low-income earners who invest for retirement. The credit is worth up to $1,000 for single filers or $2,000 if married filing jointly, for retirement plan contributions totaling $2,000 or $4,000 within a given tax year, respectively.
To qualify for the 2021 tax year, your maximum adjusted gross income (AGI) has to be equal to or less than the following amounts, based>How to file for the saver's credit for 2021
To qualify for the saver's credit now, contributions must have been made to a 401(k), 403(b), 457 plan or the federal government's Thrift Savings Plan before the end of the 2021 calendar year.
However, it's not too late to make a contribution to an IRA investment account and claim the credit for 2021. The credit is not automatic, so you'll have to proactively claim it.
For tax returns filed using tax preparation software, you will be prompted with questions about the saver's credit. Just remember that it might be referred to as the Retirement Savings Contributions Credit or the Credit for Qualified Retirement Savings Contributions.
For tax returns prepared manually, make sure you complete Form 8880, Credit for Qualified Retirement Savings Contributions, to calculate your exact credit rate and amount. Then, transfer the amount to the designated line on your Form 1040 (Schedule 3).
