The IRS recently issued a reminder that there is still time left for low- and moderate-income workers to save for retirement and earn a tax credit for 2014. Eligible taxpayers, including new college grads and others starting out, who contribute to their retirement funds before April 15, 2015, can earn a special tax credit commonly called the “Saver’s Credit.”
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
People have until April 15, 2015, to set up a new individual retirement arrangement or add money to an existing IRA for 2014, the IRS said. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2015 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
- Married couples filing jointly with incomes up to $60,000 in 2014 or $61,000 in 2015;
- Heads of Household with incomes up to $45,000 in 2014 or $45,750 in 2015; and
- Married individuals filing separately and singles with incomes up to $30,000 in 2014 or $30,500 in 2015.