If you contributed to an IRA, a 401(k) plan or certain other retirement plans this past year, you may be eligible for a tax credit to help offset the cost of these contributions. In order to qualify, you must be at least 18 years old, not a full time student, and not be claimed as a dependent on someone else’s return. If you meet these criteria and made contributions to your retirement savings in 2012, you may be entitled to a tax credit.
The credit you can claim is a percentage of the contribution amount with the highest credit percentages applying to those with lower incomes. The IRS uses the following chart to determine the amount of credit taxpayers can claim:
|
Credit %
|
Income:
Married Filing Jointly |
Income:
Head of Household |
Income:
Others |
|
50%
|
up to $34,500
|
up to $25,875
|
up to $17,250
|
|
20%
|
$34,500-$37,500
|
$25,875-$28,125
|
$17,250-$18,750
|
|
10%
|
$37,500-$57,500
|
$28,125-$43,125
|
$18,750-$28,750
|
Now, if you have met the qualifications above and fall into one of the income categories in the chart, you have only one more task before filling out the form for the credit. This credit is applied to any contributions you made less any distributions you received in the two-year period before the tax year in which you are claiming the credit. For example, your 2012 total contributions would be reduced by any distributions you received between January 1, 2010 and April 15, 2013. This subtraction rule does not apply to distributions that are rolled over into another plan or distributions that were made because of excess contributions.
Having jumped through all of these hoops, if you can claim the credit, you need to fill out form 8880, Credit for Qualified Retirement Savings Contributions, and attach it to your 2012 return. For more information on this topic, contact Henssler Financial at 770-429-9166 or experts@henssler.com.
Disclosures
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