Now is an ideal time for your employees (and you!) to look at their retirement plan contributions to be sure they are maximizing the Savers Credit. For those eligible the Savers Credit offers a valuable incentive, which could reduce your federal income tax liability, for contributing to your company’s 401(k) or 403(b) plan. Those who qualify may receive a Tax Saver’s Credit of up to $1,000 ($2,000 for married couples filing jointly) if they made eligible contributions to an employer sponsored retirement savings plan. The deduction is claimed in the form of a non-refundable tax credit, ranging from 10% to 50% of your annual contribution.
Remember, when contributing a portion of each paycheck into the plan on a pre-tax basis, employees are reducing the amount of your income subject to federal taxation. And, those assets grow tax-deferred until they receive a distribution. The Savers Credit may even further reduce their taxes.
Eligibility depends on Adjusted Gross Income (AGI), your tax filing status, and retirement contributions. To qualify for the credit, you must be age 18 or older and cannot be a full-time student or claimed as a dependent on someone else’s tax return.
Use this chart to calculate your credit for the 2019 tax year. First, determine your AGI – your total income minus all qualified deductions. Then refer to the chart below to see how much you can claim as a tax credit if you qualify.
For more information on the Savers Credit, visit this link on the IRS website.