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Tax Tip of the Week
For the week of
January 7, 2002

Some low-income taxpayers are being paid to save

A new "Saver's Credit" is available from 2002 to 2006 for qualified taxpayers. The intent is to encourage those least likely to save for retirement to do so.

The new credit applies to those with incomes up to $25,000 for singles, $37,500 for head of households, and $50,000 for married couples. To qualify for the credit, the taxpayer must be at least 18 years old, not be a full-time student, and he or she cannot be claimed as a dependent on another's tax return.

The credit is a percentage of the first $2,000 contributed to an IRA, 401(k) plan, or certain other retirement plans. The percentage varies with the amount of income. For example, for marrieds, the credit is 50% if the income is $30,000 or less, 20% if income is from $30,001 to $32,500, and 10% if income is from $32,501 to $50,000.

The Saver's Credit is in addition to whatever other tax benefits are available for making the contribution. For example, most taxpayers are able to deduct their contributions to a traditional IRA.

If you need assistance with your tax planning, please give us a call. We are here to help you.


Prior Tax TipsClick here to view previous tax tips.

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