71% of women are deprived of this tax advantage


The end of the year is fast approaching, which means that the deadline for 2019 employer pension plan contributions is fast approaching. Saving money for your future can ensure a comfortable retirement, but it can also have more immediate benefits. If you contribute to a tax-deferred retirement account, you will reduce your taxable income for the year, so you will have to pay less tax. You may be able to lower your tax bill even further if you qualify for the Saver’s Tax Credit, which I’ll explain below.

Too often, this tax credit is not claimed, especially by women, partly because they are not aware of it. A recent Transamerica investigation found that 71% of women were unaware of the savings tax credit, compared to only 54% of men. Women already have a harder time than men saving enough for their future, so they can’t afford to overlook opportunities like this that help them save more for retirement. Here’s how to take advantage of the savers’ tax credit this year.

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How the savings tax credit works

As its name suggests, the saver’s tax credit is a tax credit and not a tax deduction. Deductions reduce your taxable income for the year – the amount you owe taxes on – while credits are a dollar-for-dollar reduction in your tax bill. So if you qualify for a $1,000 tax credit, you reduce your tax bill by $1,000.

The Saver’s Tax Credit incentivizes low-income households to save for retirement by providing a tax credit on up to $4,000 in pension contributions for married couples filing jointly, or $2,000 for all other tax statuses. It’s only available to adults 18 or older who aren’t full-time students and aren’t listed as dependents on someone else’s tax returns.

The amount you will receive depends on the amount of your contributions to your retirement account, your tax situation and your adjusted gross income (AGI), which is your income minus certain tax deductions. The following table breaks down the 2019 saver tax credit rates you may be eligible for based on AGI and tax filing status.

Income ranges of the 2019 saver tax credit according to tax status

Credit rate

Married Filing Jointly

head of household

Single, married filing separately or widow(er) eligible


AGI of $38,500 or less

AGI of $28,875 or less

AGI of $19,250 or less


$38,501 to $41,500

$28,876 to $31,125

$19,251 to $20,750


$41,501 to $64,000

$31,126 to $48,000

$20,751 to $32,000


Over $64,000

Over $48,000

Over $32,000

The data source: IRS.

The examples make this easier to understand, so consider a single filer with an AGI of $19,000 in 2019. This makes them eligible for a 50% tax credit rate on their retirement contributions. If they contribute $1,000 to their retirement account, they will get a tax credit of $500 ($1,000 x 50% = $500). If they contribute $2,000 instead, their tax credit will be $1,000. They could contribute even more to their retirement account if they wanted – say $3,000 – but remember that the saver’s tax credit only takes into account the first $2,000 you contribute to your retirement account, or $4,000 for married couples filing jointly, so the biggest tax credit you could receive is $1,000, or $2,000 for married couples filing jointly.

As your income increases, your savings tax credit decreases until, finally, if your AGI exceeds $64,000 for married couples filing jointly, $48,000 for heads of families, or 32 $000 for all other filing statuses, you are no longer eligible for the saver tax credit. at all. But you’ll still get a tax deduction for the year if you put money into a tax-deferred retirement account. Low-income households that qualify for the saver’s tax credit will also benefit from these deductions.

Try to make a pension contribution this year

It is difficult for many people, especially women, to save enough for retirement while they are also trying to cover basic expenses and save for other goals. But the savers’ tax credit should encourage many to do so, even if it means making some changes to their budget.

Try to increase the amount of each paycheck you defer to retirement if you can, or start deferring money to retirement if you’re not already doing so. Look for ways to reduce your expenses, such as reducing discretionary purchases, if you need to free up more cash. You can also work overtime or start a side business to get more money. Put those extra savings into retirement first.

It doesn’t hurt to contribute even more than the $2,000 (or $4,000 for married couples filing jointly) that counts for the saver’s tax credit. You will still benefit from a tax deduction and this will help you enjoy a more comfortable retirement later on. Just keep the contribution limits in mind, as exceeding them will cost you penalties. You are allowed to contribute up to $19,000 to a 401(k) in 2019 or $25,000 if you are 50 or older. You can also contribute up to $6,000 to an IRA, or $7,000 if you’re 50 or older.

You can make 2019 IRA contributions any time by the 2019 tax return filing deadline, but you must make contributions to employer-sponsored retirement plans by the end of the year. year if you want them to count for 2019. If you can save a little extra money and think you qualify for the savings tax credit, make your contributions before the deadline so you can reap the rewards of a bigger tax refund this year and a bigger retirement nest egg.


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