A tax credit directly reduces the amount of federal income tax that you are required to pay. Example: Federal income tax liability is $600 and you’re eligible for a $200 Savers Credit. Your tax liability is decreased to $400. In this example you could receive a $200 boost in your refund or a $200 deduction in the amount you need to pay when you file your tax return.
Savers Credit Eligibility Requirements
You are eligible for the credit if you’re age 18 or older, not a full-time student, not claimed as someone’s dependent, and within the income limits.
2017 Income Limits:
-Single, married filing separately, or qualifying widow(er), with income up to $31,000.
-Head of Household with income up to $46,500.
– Married Filing Jointly, with incomes up to $62,000.
The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income.
Example: Married couple and they file a joint return. Their Adjusted Gross Income (AGI) in 2017 is $55,000. (AGI is less than taxable income and is on the last line of page 1 of your 1040 tax return form). If they contribute $1,000 to an IRA, the government will give them a $100 credit.
For more information about income limits and credit amounts visit https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit