There is a payment that is so underutilized. A lot of Americans don’t know about it. The lawmakers saw that it was not effectively utilized so they asked the IRS to publicize it to the Americans it’s not free money though, not one of the stimulus checks. It’s called the Saver’s Credit. It’s simple, you get paid a lot of money for saving for retirement.
The Saver’s Credit
Maybe you have heard of retirement savings contributions credit. That was what it was formerly called. Now it’s called Saver’s credit. It’s for middle and low-income taxpayers. It’s a tax cut for those who have contributed towards retirement in a tax year.
Maybe you have been contributing towards retirement in a piggy bank kept under your bed, that is great, but does not count. The qualified set of people is those who are actively saving towards retirement in be a 401(k) or other employer-sponsored plans, or a traditional or Roth IRA.
As mentioned before, you must save in a 401(k), Roth IRA, other employer-sponsored plans, or a traditional plan, a SIMPLE IRA, 403(b) plan, or through the Thrift Savings Plan.
You must not earn beyond a threshold. Once you pass that threshold, you won’t be regarded anymore as a middle and low-income earner, hence forfeiting the Saver’s credit.
You can either file jointly as a married couple who has not earned more than $66,000 from the 2020 tax return or $68,000 for the 2021 tax return.
You can also file as a head of a household that has not earned more than $49,500 from 2020 tax returns and $51,000 from 2021 tax returns.
The last categories are other taxpayers including individuals who earn $33,000 in 2020 tax returns and $34,000 in 2021 tax returns.
As a reminder, you file for the 2020 tax return to receive saver’s credit in 2021 and you file for 2021 tax returns to receive the check-in 2022. You show your earning in the previous year to receive the payment in the current year. The way to show your income is to file your tax returns.
How Much are we Discussing Here?
For individuals, it’s worth $1000 and for a couple that filed jointly, it is worth $2000. Here is the calculation. You get a percentage of the first $2000 you to save into your retirement savings as an individual or you get a percentage of the first $4000 you save in retirement as a couple. The percentage dependents, 50%, 20%, or 10% based on eligibility.
For example, let’s say you’re an individual, you earned $38,000 last year, and contributed $1,000 to an eligible account. You are not eligible because your income is beyond the threshold of $34,000. If a couple that filed jointly earned $38,000 in 2021. Then they are eligible for a saver’s cut depending on how much you have saved. If the couple saved $2000, then they can get as much as $1000; which is 50%. If the couple saved $5000; then they get 50% of $4000 out of the $5000. And that is at most $2000.
You are not Eligible
According to Yahoo News, you are not eligible if you are below 18 years of age, a full-time student, or you are dependent on another person’s tax returns.