For 2014 and 2015, income thresholds have been raised for the Retirement Savings Contribution Credit, known as the Saver's Credit.
The new income thresholds are as follows:
1. Married couples filing jointly with adjusted gross income of up to $60,000 in 2014 or $61,000 in 2015.
2. Heads of households with adjusted gross income of up to $45,000 in 2014 or $45,750 in 2015.
3. Married individuals filing separately and singles with adjusted gross income of up to $30,000 in 2014 or $30,500 in 2015.
The Saver's Credit began in 2002. It is designed to encourage taxpayers in lower to moderate income brackets to contribute to qualifying retirement programs. The credit is computed based on a taxpayer's filing status, adjusted gross income,tax liability and the amount contributed to qualifying retirement programs.
To claim the credit, you must be at least 18 years of age. If you are claimed as a dependent on someone else's return, you are not eligible for the credit.
In addition, if you are a full-time student, you do not qualify for the credit. A full-time student is defined as someone who is enrolled full-time for any part of five calendar months during the year.
The maximum Saver's Credit is $1,000, or $2,000 for married couples filing a joint return. This is a nonrefundable personal credit that cannot exceed your tax liability.
Form 8880 is used to compute the credit. This form is then attached to the taxpayer's 1040 return.
You still have time to contribute or defer money to a qualifying retirement program. If you have a deferred compensation program at work, deferrals must be made by Dec. 31, 2014.
If you have your own IRA, you have until April 15, 2015, to make contributions that will affect your 2014 income tax return