If you haven’t submitted your taxes yet, there’s some good news – if you qualify, you may be able to boost your finances both now and later with the Saver’s Credit (also known as Retirement Savings Contributions Credit).
The credit is meant to reward low and moderate income workers for saving towards their retirement. It’s a double win because not only are you building up your retirement fund, but you’re also saving on your taxes and you can still contribute to an IRA up until the tax deadline and reap the benefits of the tax credit on your 2015 taxes if you haven’t already filed.
How Does the Saver’s Credit Work and Who Qualifies?
The gist of the credit is that you can get a certain credit for the first $2,000 ($4,000 for couples) you voluntarily contribute to your IRAs, 401(k) plans, and similar workplace retirement programs.
What makes it even better is that this credit is in addition to the deduction you get for contributing to a traditional IRA or 401(k). That means more money stays with you (and the invested amount grows). Sounds fantastic, but just how do you qualify to claim it?
The amount of the credit will be 50 percent, 20 percent or 10 percent of the first $2,000 ($4,000 for married couples) contributed based on your income. Currently those who are single may qualify if their income was $30,500 or less. Head of Households filing may claim the credit if their income was $45,750 or less and married filing jointly may qualify if their income last year was $61,000 or less. You also cannot be a dependent on someone else’s taxes and you must be over 18.
Knowing about the credit doesn’t do you any good if you don’t use it. So how do you find some money in your budget so you can contribute towards your retirement?
Plan Ahead and Save Now
Since you now know about the Saver’s Credit, even if you couldn’t take it this year, you can go ahead and start contributing in 2016. If you need to find some extra money in your budget so you can contribute here are some ideas you can try out now:
- Switch up cell phone plans: With more competitors trying new strategies, you can significantly cut your cell phone bills. Some providers offer unlimited talk, data, and text plans for about half of what bigger companies charge.
- Compare car insurance. By checking out and switching providers, we saved a nice chunk of money. As a tip, have a copy of your current policy to make sure you’re getting the same coverage.
- Optimize your entertainment budget. Call your local provider and see if you can get a better rate on your cable and internet. If you prefer to cut the cord, see if there are any online options that fit what you want. We saved cash by negotiating a better deal on our internet.
It can be an adjustment, but we’ve found shopping around has made our dollars go further. The money saved has been used to invest more. I hope these tips help you to do the same.
Thoughts on Saving
I’d love to hear from you. How many of you are contributing towards your retirement?