Only 12% of full-time American workers with annual household incomes of less than $50,000 are aware of the credit, according to the 11th annual Transamerica Retirement Survey.
“The Saver’s Credit is a meaningful incentive for low-to-middle income individuals and households to save for retirement. Unfortunately, few are aware that it’s available,” said Catherine Collinson, president of the Transamerica Center for Retirement Studies, in a press release. “It’s important that we work to raise awareness of this wonderful tax credit and opportunity to save for retirement so that more workers may take advantage of it and improve their chances of financial security down the road.”
The Saver’s Credit may be applied to the first $2,000 of voluntary contributions an eligible worker makes to a 401(k) or similar employer-sponsored retirement plan, or an IRA. Credits of up to $1,000 for single-filers, and $2,000 for married couples, are available.
The press release notes that the credit is available to workers aged 18 years or older who have contributed to a company-sponsored retirement plan or IRA in the past year and meet the Adjusted Gross Income requirements. Single filers with an adjusted income of up to $27,750 in 2010 or $28,250 in 2011 are eligible. For the head of a household, the adjusted income limit is $41,625 in 2010 and $42,375 in 2011. For those who are married and file a joint return, the adjusted income limit is $55,500 in 2010 or $56,500 in 2011. Additionally, the filer cannot be a full-time student or be claimed as a dependent on another person’s tax return.
The credit is not available with Form 1040EZ; however the IRS has included instructions with the EZ form directing taxpayers to a different form if they choose to claim the credit.Taxpayers preparing their returns manually should complete Form 8880, the Credit for Qualified Retirement Savings Contributions, to determine the exact credit rate and amount.