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Saving for retirement can yield a tax break
Personal finance » Credits are there for those with modest incomes.
First Published Apr 12 2013 07:49 am • Last Updated Apr 12 2013 07:49 am

The Tribune is providing down-the-stretch tips and reminders to help you complete the right forms, apply for all the deductions and credits you can, and get your tax filings in on time by April 15.

Countdown Tip No. 3: Reduce your taxes by saving for retirement.

At a glance

Countdown to April 15 — last-minute tips

Haven’t filed your taxes yet? Check out The Tribune’s Countdown to Tax Day series with information that can help as the deadline approaches:

April 4 » Where to get free help

April 5 » How to avoid tax scams

April 6 » The joys of filing electronically

Sunday » What’s the Earned Income Tax Credit?

Tuesday » Don’t miss out on the Child and Dependent Care Credit

Wednesday » Understand your taxes if you’re self-employed

Thursday » Watch out for fees when paying taxes by credit card

Today » Reduce your taxes by saving for retirement

Saturday » Use the Taxpayer Advocate when tackling the IRS

Sunday » Don’t ignore your taxes; file an extension to get more time

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If you earn a modest living and still funnel money into a retirement account, you could be eligible for a nice tax credit.

Known as the saver’s credit, those in low- and middle-income brackets who are setting aside money for retirement can claim up to $1,000 for individuals and $2,000 for married couples. It’s a credit, so it reduces income taxes dollar-for-dollar, and workers can file for it and still get a tax deduction for contributing to a retirement account.

To qualify for the saver’s credit, an individual must be pay into a traditional or Roth IRA, 401(k), or a governmental 457 plan or 403(b) annuity plan. The taxpayer can’t be a full-time student or a dependent on someone else’s tax filing.

The amount of the credit is based on filing status and income level. For instance, if you’re single and earn less than $28,750 a year, or if you’re a married couple earning up to $57,500, you could claim the credit. But there’s no promise that you’ll get the full amount. According to the Internal Revenue Service, the credit "is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers."

If you’re income eligible, you have until April 15 to set up an IRA or add money to your retirement account to get the credit for 2012.

Questions? IRS.gov, of course.

Coming up tomorrow: Use the Taxpayer Advocate when tackling the IRS.


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jnpearce@sltrib.com

Twitter: @jnpearce



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