More Americans will be eligible for this additional $ 2,000 tax credit in 2022: do you?


If you want to save more money on your taxes, a savings loan might do the trick. Formerly known as the Retirement Savings Contribution Credit, this tax break can cause you to lose up to $ 1,000 ($ 2,000 if you are married) on your tax account. This is a generous IRS incentive designed to encourage more people to put money aside for retirement.

There is one small catch though: you must contribute to a qualifying retirement account and meet income criteria. Fortunately, the IRS just released the new income ranges for 2022, and they’re bigger than ever.

We will detail the latest Saver’s Credit qualifications and help you determine if you are in the running for this offer.

Image source: Getty Images.

The secret credit of the saver

Saver’s Credit has been around for two decades, but it’s not getting the attention it deserves. This non-refundable tax credit comes in handy when you owe money during tax season.

Let’s say you are in the hole for $ 1,000. The savings credit offers a dollar for dollar reduction to your tax tab. If you are single and eligible for a $ 1,000 credit, you could reduce your tax bill to zero.

While the IRS wants to encourage more low- and moderate-income people to save more, putting money under your mattress won’t be enough. You must contribute to a qualified retirement savings account to be eligible for the savings loan. Here are some accounts that can get you closer to that credit:

Take the income test

Since savings credit is essentially free government money, tax benefits are only available to individuals in specific income brackets.

The 2022 income ranges are higher than they were in 2021. This means more Americans can benefit from this savings incentive. To verify your eligibility, track your Adjusted Gross Income (AGI). This number will determine whether you are eligible for the savings credit in tax year 2022, the one for which your tax return is due by April 2023.

If you are married and filing jointly, your AGI must be $ 68,000 or less (compared to $ 66,000 in 2021); reporting head of household, AGI of $ 51,000 or less (compared to $ 49,500 in 2021); and all other filers, AGI of $ 34,000 or less (up from $ 33,000 in 2021).

Apply credit rates

Not everyone will be entitled to the same amount of credit. Your income and the status of your return will determine how much you can reduce your tax bill. There are three credit rates: 50%, 20% and 10%. The less money you earn, the higher the credit rate you qualify for.

The maximum amount of the contribution that can be taken into account in the credit of a single person is $ 2,000. This means that a single person is eligible for a maximum credit of $ 1,000 if they contribute at least $ 2,000 to a retirement savings account and qualify for the 50% credit rate. A married couple may be eligible for a maximum credit of $ 2,000. If you are wondering what you are entitled to, here is a table to calculate the credit you will receive.

2022 savings loan rate and AGI eligibility, by deposit status

Credit

Married Joint deposit

(IAG)

Head of household

(IAG)

All other reporters

(IAG)

50% of your contribution

$ 0 to $ 41,000

$ 0 to $ 30,750

$ 0 to $ 20,500

20% of your contribution

$ 41,001 to $ 44,000

$ 30,751 to $ 33,000

$ 20,501 to $ 22,000

10% of your contribution

$ 44,001 to $ 68,000

$ 33,001 to $ 51,000

$ 22,001 to $ 34,000

0% of your contribution

Over $ 68,000

Over $ 51,000

Over $ 34,000

DATA SOURCE: IRS.

Don’t miss this extra credit

Savings credit can save you big money on your tax return. This is especially useful for people who do not have taxes taken from their paycheck. Instead of being stuck with a tax bill at the end of the year, the savings credit can be applied to your balance and potentially wipe out all of your liability.

If you think you owe taxes, consider contributing to a retirement account. Try to contribute as much as possible so that you can save more money for retirement. With the increase in income brackets, you may be eligible for a larger tax credit than expected.

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