The National Institute on Retirement Security and the Pension Rights Center have recently teamed up to issue a new fact sheet designed to shine a light on the Retirement Savings Contribution Credit, an underutilized incentive to encourage taxpayers to save for retirement.
Also known as the Saver’s Credit, the incentive allows lower-income workers who put money into a retirement account to receive a credit on their federal income taxes, which helps to stretch their retirement savings dollars a little further. Unfortunately, of those who are eligible, only 25 percent actually take advantage of the credit.
To be eligible, the taxpayer or their spouse must:
- Be 18 or older
- Not be a full-time student
- Not be claimed as a dependent on another filer’s return
- Make less than $30,750 if single or less than $61,500 if married
- Make a retirement contribution to a myRA, Individual Retirement Account (IRA), 401(k), 403 or 457 plan
- File a Federal Form 1040 or 1040A U.S. Individual Income Tax Return
“As employers use auto-enrollment in their defined contribution plans more frequently,” the fact sheet states, “moderate-income families may not be aware of this tax credit, which could reduce their taxes due by 10 to 50 percent of their retirement contribution.”
By providing an overview of the Saver’s Credit and how it works, the fact sheet, which is complete with several small case studies, eligibility requirements and additional information, is a great resource for employers who are looking to provide employees with additional incentive to participate in their retirement plan.
You can check out the free fact sheet here.
Email Rea & Associates to learn more.
By Paul McEwan, CPA, MTax, AIFA (New Philadelphia office)