Retirement Savings Contributions Credit 2022 Explained.
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TRAVIS T SICKLE, CFP®, EA®, AAMS®, CRPC®, RICP®
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Saving for retirement is an important aspect of financial planning, but for many people, it can be a daunting task. However, there is a little-known tax credit that can help boost your retirement savings while also lowering your tax bill. This credit, known as the Saver’s Credit or the Retirement Savings Contributions Credit, can provide a valuable incentive for low- and moderate-income individuals to save for retirement.
The Saver’s Credit is designed to encourage individuals to contribute to their retirement savings accounts, such as 401(k) plans, IRAs, or Roth IRAs. To be eligible for the credit, you must meet certain income requirements and contribute to a qualifying retirement account. The credit is worth up to $1,000 for individuals and up to $2,000 for married couples filing jointly, and it is available to taxpayers with an adjusted gross income of up to $33,000 for individuals, $49,500 for heads of household, and $66,000 for married couples filing jointly in 2022.
The amount of the credit is based on a percentage of your contributions to a retirement account, with the percentage ranging from 10% to 50% depending on your income level. For example, if you are a single filer with an adjusted gross income of $20,000 and you contribute $2,000 to a retirement account, you could be eligible for a credit of $200, which is 10% of your contribution.
One of the key benefits of the Saver’s Credit is that it is a dollar-for-dollar reduction of your tax bill, meaning that it directly lowers the amount of taxes you owe. This can provide a significant financial incentive to save for retirement, as it effectively allows you to save more for retirement without any additional cost.
To claim the Saver’s Credit, you must file Form 8880, the Credit for Qualified Retirement Savings Contributions, along with your tax return. You will need to provide information about your contributions to a retirement account and calculate the amount of the credit you are eligible for based on your income level. The credit will be applied to your tax bill, reducing the amount of taxes you owe or increasing your refund.
In conclusion, the Saver’s Credit is a valuable tax credit that can help low- and moderate-income individuals save for retirement while also reducing their tax bill. By taking advantage of this credit, you can boost your retirement savings and get on track to a more secure financial future. So if you are eligible, be sure to contribute to a retirement account and claim the Saver’s Credit on your tax return in 2022.
Great video!
I used to qualify for the savers credit 3 years ago. But i don't get it any more.
I invested 2k in Roth IRA in 2022.
But in 2022, i started earning dividend income of 1500 per year(for the first time) on top of 17k W2 income. so Total $18500.
(The income limit for Single Filer is 19,500 that year)
However, i did not qualify for any savers credit at all. why? Maybe having Investment income disqualified me from being eligible?
Thank you for the very informative video.
Hey! Im not from USA but could you help me know who files this form? Employer and employee or spouses only?
I need to take a look at the AGI on my return because I did contributed to the max to a Roth IRA and an HSA plus TSP/403B. However I filed yesterday and the AGI figures seem a bit low
Hi Travis, The contribution I make shows up on my W2 form on line 12b with the letter E. Is that the amount I should put in the 8880 form?
This is incorrect. If a retirement plan is an adjustment, for example a traditional IRA, it does NOT qualify for a credit as well. Roth IRA is one of the only things that qualify for savers credit.
Thank you, Travis. You made it so easy to understand.
I lost you at the end of the video. How will the MFJ with AGI of $122k be able to benefit from this credit?
Can you give more info on this $60,000 we can save!
Can we save it in a ROTH?
Is it a 401K or IRA?
I assume we will have RMD’s???
Try not to put your fingers over the numbers
What if you have filing children? Can you still qualify
Lost me around the 6min Mark how would 150k married couple be able to get this credit?