(MoneyHippo.com) – When Americans file their taxes each year, there may be a tax credit they could be missing. The Savers Credit used to be known as the Retirement Savings Contributions Credit, and it gives low to middle-income taxpayers a tax break each year, as long as they qualify. Beyond the qualifying factors, the credit is non-refundable, meaning it can only reduce a person’s tax liability but cannot contribute to a refund.
The tax break gives the taxpayer credit for a percentage of the first $2,000 saved for retirement in the previous year. So, to qualify, the person must have contributed money to a retirement account like a 401k, Traditional IRA, Roth IRA, or 457 plan. To be eligible for the credit, you have to be over 18 years old, not claimed as a dependent, not a full-time student, and hit certain income thresholds.
Although the income wickets can vary year to year, the tax credit looks at your adjusted gross income to determine eligibility. For 2021, the maximum income level for couples filing jointly was $66,000, $49,500 for head of household, and $33,000 for everyone else.
To claim the credit, the taxpayer must file Form 8880, entitled Credit for Qualified Retirement Savings Contributions.
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