IRSbuilding

Truckers: Retirement savings tax credit available

A tax credit for retirement savings contributions is being overlooked by 64% of U.S. workers, according to a new survey.

Roughly 64% of U.S. workers may be overlooking a tax credit this year for contributions made to their retirement accounts, according to the 18th Annual Transamerica Retirement Survey.

The “Retirement Savings Contributions Credit” is a non-refundable tax credit that may be applied up to the first $2,000 of voluntary contributions an eligible worker makes to a 401(k), 403(b) or similar employer-sponsored retirement plan, or a traditional or Roth IRA. The maximum credit is $1,000 for single filers or individuals and $2,000 for married couples.

“The ‘Saver's Credit’ is a tax credit in addition to the benefit of tax-advantaged savings when contributing to a 401(k), 403(b) or IRA. Many eligible retirement savers may be confusing these two incentives because the notion of a double tax benefit seems too good to be true,” noted Catherine Collinson, president of nonprofit Transamerica Center for Retirement Studies.

The credit is available to workers ages 18 years or older who have contributed to a company-sponsored retirement plan or IRA in the past year and meet the Adjusted Gross Income (AGI) requirements:

  • Single filers with an AGI of up to $31,000 in 2017 or $31,500 in 2018 are eligible;
  • For the head of a household, the AGI limit is $46,500 in 2017 or $47,250 in 2018; and,
  • For those who are married and file a joint return, the AGI limit is $62,000 in 2017 or $63,000 in 2018.

Additionally, the filer cannot be a full-time student and cannot be claimed as a dependent on another person's tax return. For more details about eligibility, refer to this fact sheet and infographic.

"Workers who are eligible to receive the Saver's Credit are at risk of missing it if they use the wrong tax form. If you are eligible to claim the Saver's Credit, you should use Form 1040, Form 1040A or Form 1040NR. The Saver's Credit is not available on Form 1040EZ," said Collinson.

Another important and potentially overlooked opportunity is the IRS Free File program, she noted. Workers who are eligible to claim the Saver's Credit are also eligible to take advantage of this program that offers federal income tax preparation software for free to tax filers with an AGI of $66,000 or less and 12 companies make their tax preparation software available through this program at www.irs.gov/FreeFile, though certain restrictions may apply, Transamerica noted.

Unfortunately, about 55% of workers polled in the Transamerica survey are unaware of this offering.

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