Legal offers retirment contribution tax tip
By Capt. Lance Smith , 47th FTW Legal Office
/ Published March 28, 2007
Laughlin AFB, Texas --
Are you aware of the "Retirement Savings Contributions Credit?" This tax credit may be available to you if you voluntarily put money aside for your retirement in a number of different accounts or plans including: contributions (not including rollover contributions) to a traditional or Roth IRA, elective deferrals to a 401(k) and voluntary contributions made to a federal Thrift Savings Plan. These savings contributions must be made before the due date (including extensions) of your 2006 tax return.
Qualified individuals may be entitled to a credit of up to 50 percent of the amount contributed to a qualified retirement plan, up to a maximum of $1,000 ($2,000 if married filing joint). The amount of the credit will depend on your adjusted gross income (AGI), the amount contributed to a qualified retirement plan, your tax liability and your other credits. The credit is generally not available for single filers with an AGI greater than $25,000 or married filers with an AGI greater than $50,000. Also keep in mind that this credit can only lower your tax liability, any amount available under this credit that places you into a situation of negative tax liability will not be refunded.
To claim the credit, you must file IRS Form 8880. Note: If you use the free online tax preparation software, H&R Block TaxCut Basic Online, available at http://www.militaryonesource.com, this credit is referred to as the "Saver's Credit."
More information about the Credit for Retirement Contributions can be found in the instructions to IRS Form 8880 available at http://www.irs.gov/pub/irs-pdf/f8880.pdf and in Publication 590 available at http://www.irs.gov/pub/irs-pdf/p590.pdf.