Less than half of American workers are aware of a tax credit for retirement savings | national news

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LOS ANGELES, February 15, 2022 /PRNewswire/ — Less than half (48%) of working Americans are aware of a tax credit that could help them save for retirement, according to the results of a survey by the Transamerica Center for Retirement Studies in non profit® (TCRS). Also called the Retirement Savings Contributions Credit by the Internal Revenue Service (IRS), the savings credit is available to millions of eligible taxpayers who are saving for retirement.

“Saving for retirement can be tough at the best of times, but even tougher for many during the pandemic and tough economy,” said Catherine CollinsonCEO and President of the Transamerica Institute® and TCRS. “The savings credit can help people save more easily because it reduces their federal income tax.”

What is the saver’s credit?

The Savings Credit is a non-refundable tax credit that can be applied until the first $2,000 voluntary contributions that an eligible taxpayer makes to an employer-sponsored 401(k), 403(b), or similar retirement plan, traditional or Roth IRA account, or ABLE account. In this context, “non-refundable” means that the credit cannot exceed a person’s federal income tax for the year. The maximum credit is $1,000 for single registrants or individuals and $2,000 for married couples declaring jointly.

“In addition to the favorable tax treatment of retirement savings in a 401(k), 403(b), or IRA, the savings credit is an added benefit that can reduce a person’s federal taxes. Unfortunately, many many eligible retirement savers might be confusing these two incentives, simply because the idea of ​​a double tax benefit sounds too good to be true,” Collinson said.

Who can claim the saver’s credit?

The credit is available to individuals age 18 or older who have contributed to an employer-sponsored 401(k), 403(b), or similar retirement plan, traditional or Roth IRA account, or ABLE account. in the past year and who meet the Adjusted Gross Income (AGI) requirements:

  • Single registrants: maximum AGI of $33,000 in 2021 and $34,000 in 2022;
  • Heads of families: maximum AGI of $49,500 in 2021 and $51,000 in 2022; and,
  • Spouses declaring jointly: a maximum AGI of $66,000 in 2021 and $68,000 in 2022.

Also, the filer cannot be a full-time student and cannot be claimed as a dependent on another person’s tax return. For more details on eligibility, see the TCRS fact sheet.

Tips for claiming the Saver’s Credit:

  • Consider using the IRS’ online tool to help determine if you qualify for the credit.
  • If you use any online tax preparation tool to prepare your tax return, including those offered by the IRS Free File program, be sure to answer the Saver’s Credit questions, also known as the ‘Credit for Contributions to Retirement Savings’ and ‘Credit for Qualified Retirement Savings Contributions.’
  • If you prepare your tax return manually, complete Form 8880, Credit for Qualified Retirement Savings Contributions, to determine your exact rate and amount of credit. Then transfer the amount to line 4 of Schedule 3, used with Forms 1040, 1040-SR, and 1040-NR.
  • If you use a tax preparer, be sure to ask about savings credit.
  • If you get a refund, consider depositing it directly into an IRA to boost your retirement savings.

Another potentially overlooked opportunity is the IRS Free File program. Many people eligible for Crédit Épargnant can also benefit from this program. It offers registrants with an AGI of $73,000 or less free online tax preparation tools to prepare their federal taxes. This year, eight products in English and two in Spanish are available at www.irs.gov/FreeFile. Some restrictions may apply.

“Please help spread the word about Savings Credit by telling your family, friends and colleagues. It can have a significant impact on an individual’s long-term savings and even inspire non-savers to start saving. for their retirement,” Collinson said. “This year, more people could fall under the AGI limits to qualify for Saver’s Credit given the disruptions to employment during the ongoing pandemic. And it’s not too late – people eligible individuals who did not save for retirement last year can contribute to an IRA up to April 18, 2022 for the 2021 tax year – and may be able to claim the savings credit.”

Additional information and resources, including fact sheets, infographics and a newsletter article – in English and Spanish – as well as a podcast episode are available and encouraged for public use at http://www. transamericainstitute.org/saverscredit. More information can also be found at www.irs.gov.

About the Transamerica Center for Retirement Studies

Transamerica Center for Retirement Studies® (TCRS) is an operating division of the Transamerica Institute®, a private non-profit foundation. The Transamerica Institute is funded by contributions from Transamerica Life Insurance Company and its affiliates and may receive funds from unaffiliated third parties. TCRS and its representative cannot give ERISA, tax, investment or legal advice. This material is provided for informational purposes only and should not be construed as ERISA, tax, investment or legal advice. Interested parties should consult and rely only on their independent advisors regarding their particular circumstances and the concepts presented herein. For more information about TCRS, please visit www.transamericacenter.org and follow TCRS on Twitter at @TCRStudies.

About Transamerica’s 22nd Annual Retirement Survey

This online survey was conducted in the United States by The Harris Poll on behalf of the Transamerica Institute and the TCRS between October 28 and December 10, 2021, among a representative national sample of 10,003 adults and an oversample of 2,005 workers in a for-profit company employing one or more employees. The data in this news release are presented for a subsample of 5,493 workers in a for-profit enterprise with one or more employees. Results were weighted where necessary to bring them into line with the US resident population, referencing census data for education, age by gender, race/ethnicity, region, household income, education, employment, marital status and household size. The weighting also takes into account differences in attitude and behavior between those who are online and those who are not, those who join online panels versus those who do not, and those who respond to surveys. compared to those who do not.

News

Transamerica Center for Retirement Studies®

Los Angeles, CA

Media Contact: Morgan Karbowski

[email protected]

425-753-5719

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SOURCE Transamerica Center for Retirement Studies


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