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Tax credit for low- and middle-income taxpayers

You may be eligible for a tax credit (called the “saver’s credit”) if you’re a low- or middle-income taxpayer saving for retirement through an IRA, 403(b) or 401(k) plan.

The amount of the credit you can get is based on the contributions you make and your credit rate. The credit rate can be as low as 10% or as high as 50%, depending on your adjusted gross income — the lower your income, the higher the credit rate. The credit rate also depends on your filing status.

The maximum credit is $1,000 per person. If you are married and file a joint tax return, you could receive a total credit of up to $2,000 ($1,000 for you and $1,000 for your spouse).

The credit is available to you if you:

  • are 18 or older,
  • are not a full-time student,
  • are not claimed as a dependent on someone else’s return, and
  • are within the adjusted gross income levels in the chart below.

Filing Status Adjusted Gross Income for 2016 Tax Year
Married Filing Jointly $0 - $37,000 $37,001 -$40,000 $40,001 - $61,500 Over $61,500
Head of Household $0 - $27,750 $27,751 - $30,000 $30,001 - $46,125 Over $46,125
Single & Married Filing Separately $0 - $18,500 $18,501 - $20,000 $20,001 - $30,750 Over $30,750
Tax Credit Rate * 50% 20% 10% 0%

Filing Status Adjusted Gross Income for 2017 Tax Year
Married Filing Jointly $0 - $37,000 $37,001 -$40,000 $40,001 - $62,000 Over $62,000
Head of Household $0 - $27,750 $27,751 - $30,000 $30,001 - $46,500 Over $46,500
Single & Married Filing Separately $0 - $18,500 $18,501 - $20,000 $20,001 - $31,000 Over $31,000
Tax Credit Rate * 50% 20% 10% 0%

Source: www.irs.gov

* Based on percentage of contribution.

The amount of your saver’s credit will not change the amount of your refundable tax credits. A refundable tax credit, such as the earned income credit or the refundable amount of your child tax credit, is an amount that you would receive as a refund even if you did not otherwise owe any taxes.

The amount of your saver’s credit in any year cannot exceed the amount of tax that you would otherwise pay (not counting any refundable credits or the adoption credit) in any year. If your tax liability is reduced to zero because of other nonrefundable credits, such as the Hope Scholarship Credit, then you will not be entitled to the saver’s credit.

 

Special note for ministers — Ministers taking advantage of the minister’s housing allowance may find they are eligible for the saver’s credit since minister’s housing allowance is not included in their adjusted gross income.

 


This educational information is not intended as legal or tax advice. Ministers or churches with specific legal or tax questions should consult a legal or tax advisor who understands ministerial tax issues.