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Retirement Savings Credit

Now that 2009 is in the books, many people are searching for ways to avoid paying Uncle Sam any more of their hard earned money. It has been said that there are but two certainties in life, “death and taxes”, but a little known tax credit can help you pay yourself instead of the government.

The Retirement Savings Credit is designed as a tax credit for those in lower income brackets in an effort to help motivate people to save for retirement. With the credit, individuals can deduct money from their tax obligation (up to $1000) after contributing money to an IRA or 401k , or other retirement plans. This tax credit is in addition to the already tax advantageous features of retirement plans and should be considered when preparing your income taxes.

The amount that you may claim is directly related to your income with the highest percentage (50%) being for those with an adjusted gross income of less than $16,000 for Single Filers.

If you still want to take advantage of this credit you have until April 15th (or until you file your 2009 taxes) to claim this credit. If you are able to contribute, and immediate 50% return on your investment is hard to pass up.

Retirement savings credit income limits:
Credit rate Single, widow(er) or married separate filer income limits Married, joint filer income limits Head of household filer income limits
50% Up to $16,000 Up to $32,000 Up to $24,000
20% $16,001 to $17,250 $32,001 to $34,500 $24,001 to $25,875
10% $17,251 to $26,500 $34,501 to $53,000 $25,876 to $39,750
No credit $26,501 or more $53,001 or more $39,751 or more