Monday, March 21, 2016

Federal Savers Tax Credit Available for Low to Middle Income Taxpayers

By Jordan Schreier

With one month remaining until the April 15, 2016 tax filing deadline, low to middle income taxpayers should remember to take advantage of the federal Retirement Savings Contribution Credit (Saver’s Tax Credit). The Saver’s Tax Credit provides low to middle income individuals who have contributed to an employer 401(k), 403(b) or 457(b) plan, to an IRA and to certain other retirement savings programs, a direct federal tax credit up to a dollar maximum. Because this is a tax credit, it reduces a taxpayer’s federal income tax by the amount of the credit and is available to taxpayers who do not itemize deductions.

To claim the Saver’s Tax Credit, an individual must be at least age 18, not a full-time student, cannot be claimed as a dependent on another person’s tax return and have contributed to a covered retirement program. The amount of the credit is a percentage of the taxpayer’s contribution up to $2,000 ($4,000 for married filing jointly) based on the taxpayer’s filing status and adjusted gross income as follows:

2015 Saver’s Tax Credit
Credit Rate
Married Filing Jointly
Head of Household
All Other Filers
50% of contribution
AGI not more than $36,500
AGI not more than $27,375
AGI not more than $18,250
20% of contribution
$36,501 - $39,500
$27,376 - $29,625
$18,251 - $19,750
10% of contribution
$39,501 - $61,000
$29,626 - $45,750
$19,751 - $30,500
0% of contribution
more than $61,000
more than $45,750
more than $30,500

2016 Saver’s Tax Credit
Credit Rate
Married Filing Jointly
Head of Household
All Other Filers
50%  of contribution
AGI not more than $37,000
AGI not more than $27,750
AGI not more than $18,500
20% of contribution
$37,001 - $40,000
$27,751 - $30,000
$18,501 - $20,000
10% of contribution
$40,001 - $61,500
$30,001 - $46,125
$20,001 - $30,750
0% of contribution
more than $61,500
more than $46,125
more than $30,750

Employers who sponsor retirement programs should remind their employees of the Saver’s Tax Credit each year. Also, every taxpayer who qualifies should claim the credit for 2015 and should take the credit into account when making contributions to a retirement program in 2016.

For more information, please contact Jordan Schreier in our Ann Arbor, Mich. office at 734-623-1945.