You may be eligible for a valuable incentive, which could reduce your federal income tax liability, for contributing to your company’s 401(k) or 403(b) plan. If you qualify, you may receive a Tax Saver’s Credit of up to $1,000 ($2,000 for married couples filing jointly) if you 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 you contribute a portion of each paycheck into the plan on a pre-tax basis, you are reducing the amount of your income subject to federal taxation. And those assets grow tax-deferred until you receive a distribution. If you qualify for the Tax Saver’s Credit, you may even further reduce your taxes.
Your eligibility depends on your adjusted gross income (AGI), your tax filing status, and your 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 the link below to calculate your credit for the tax year 2023. First, determine your AGI – your total income minus all qualified deductions. Then refer to the link below to see how much you can claim as a tax credit if you qualify.
With the Tax Saver’s Credit, you may owe less in federal taxes the next time you file by contributing to your retirement plan today!
Distributions before the age of 59 ½ may be subject to an additional 10% early withdrawal penalty. This is for informational purposes only; we suggest that you speak with a tax professional about your individual situation.
Source: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit
