Millions of Americans Overlook Retirement Savings Tax Credit

401k, tax, retirement, Transamerica

We like lower taxes.

Pointing it out might build more trustand business.

A recent study revealed that 64 percent of American workers don’t know about a tax credit available to employees who are contributing to an employer-sponsored retirement plan or individual retirement account (IRA).

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

To qualify for the Saver’s Credit, formally called the Retirement Savings Contributions Credit by the IRS, workers need to be age 18 or older and meet the following criteria:

The non-refundable credit can be applied to the first $2,000 of voluntary contributions to eligible retirement accounts, with a maximum credit of $1,000 for single filers and $2,000 for joint filers.

“Among those who are not yet saving for retirement, the Saver’s Credit could be the incentive they need to get started,” Collinson added.

One important caveat: “Workers who are eligible to receive the Saver’s Credit are at risk of missing it if they use the wrong tax form,” Collinson explained. “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.”

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