Again in 2021, a taxpayer with low to moderate income who is saving for retirement may be able to take a tax credit, per the IRS.
- Please note that the IRS webpages had not been updated for 2021 as of this writing; you may see information for 2020 when you follow the link.
The Saver's Credit is in addition to the savings a UU Retirement Plan participant realizes when they reduce their taxable income by authorizing pre-income-tax salary-reduction contributions (also known as Elective contributions).
Income limits for the 2021 Saver's Credit:
- for singles and married individuals filing separately $33,000
- for heads of household $49,500
- for married couples filing jointly $66,000
Why Would I Care?
A tax credit is one of the fastest ways to lower income taxes, since each dollar of credit reduces the federal income tax an employee owes by one dollar.
How Much Might I Get?
If you qualify, the maximum credit is capped at $1,000, or $2,000 if married filing jointly. The IRS chart shows the maximum income level for various filing statuses. Use that chart to calculate your credit.
Filing for the Credit
See IRS Form 8880 (PDF) to determine your credit rate. The IRS has included information about the Saver's Credit in the instructions for Form 1040EX, but you cannot claim it on the EZ. You must file Form 1040, 1040A, or 1040NR and attach Form 8880 to that tax return.
Who is Eligible?
You may be eligible for the credit it you are making voluntary contributions to the UU Retirement Plan, or certain other qualified plans designated in the IRS information. You must be:
- Age 18 or better, and
- not a full-time student, and
- not claimed as a dependent on another person's return, and
- not have AGI of more than the limits set in the IRS chart (link above)
Does Everyone Qualify?
The Saver's Credit is meant to provide those with low and moderate incomes with an incentive to save. The strict income limits and related details are included on the IRS form and chart links above.
- Ministers' AGI does not include the amount designated as their clergy housing allowance, and thus, to their surprise, a minister may find that they are eligible for the Saver's Credit.
- If you qualify and don't apply, you are leaving money on the table.
- Dependents, full-time students, and people under age 18 are not eligible for the Saver's Credit.
- Only voluntary contributions are considered. Employer's contributions cannot be claimed toward the Saver's Credit.
- The Earned Income Credit (EIC) and the Savers Credit can be simultaneously claimed.
- The UUA does not offer tax advice. The information provided here is summarized, and participants are urged to review the source of this information, which is the IRS website linked above.