Tax Tips: A tax credit for retirement savings

You might be able to get the Retirement Savings Contributions Credit if you contribute money to a 401(k) plan or an individual retirement arrangement (IRA). The catch is that you can only get the credit if your income falls below certain levels: single $26,000, head of household $39,000, married filing jointly $52,000.

The credit goes up to a maximum of $1,000, but you must not be a full-time student and must not be claimed as a dependent on someone else's return. The lower your income, the higher your credit amount.

This credit gives retirement savings a double bonus: You get to reduce your taxable income by the amount of the contribution, and you get a tax credit that reduces the amount of income taxes you pay. More information about the credit can be found here.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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