Saving for
Retirement
The seldom-used retirement savings contributions credit is
about to expire
Taxpayers may be eligible for the retirement savings
contributions credit if they make retirement plan contributions of up to
$2,000. The credit is only available through 2006, unless Congress extends
it. The credit amount is based on both the filing status and
adjusted gross income (AGI)of the taxpayer. The most you can expect is 50
percent of your contributed amount, up to $1,000 per individual. See the
following table:
Adjusted Gross Income (AGI) Amounts and Allowable Credit Percentage
Married Filing Jointly:
Not over $30,000 – 50 percent
Over $30,000 and not over $32,500 – 20 percent
Over $32,500 and not over $50,000 – 10 percent
Over $50,000 – no credit
Head of Household:
Not over $22,500 – 50 percent
Over $22,500 and not over $24,375 – 20 percent
Over $24,375 and not over $37,500 – 10 percent
Over $37,500 – no credit
All Other Taxpayers:
Not over $15,000 – 50 percent
Over $15,000 and not over $16,250 – 20 percent
Over $16,250 and not over $25,000 – 10 percent
Over $25,000 – no credit
While the AGI limits may bar many taxpayers from
claiming the credit, some family members with lower incomes may be able to
benefit. For example, if a married couple cannot qualify for the
credit but has children in college or high school who have part-time jobs,
the children may be able to claim the credit. Higher-income parents
might consider helping their children contribute to Roth IRA's to claim
the retirement savings contributions credit.
