Uncle Sam offers an incentive for lower-income taxpayers to contribute to retirement-savings plans. By Kimberly Lankford, Contributing Editor October 26, 2011 You mentioned the retirement savers’ tax credit in one of your recent columns. Can you tell me more about it and what I have to do to claim it?SEE ALSO: Tax Breaks for the Middle Class This frequently overlooked tax credit, officially known as the Retirement Savings Contribution Credit, can reduce your tax bill by up to $1,000. It is designed to encourage lower-income workers to save for retirement, but it can also benefit those who lose their job or retire partway through the year. Sponsored Content To claim the retirement savers’ credit for 2011, your adjusted gross income must be $28,250 or less if you’re single, $42,375 or less if you file your tax return as head of a household, or $56,500 or less if you are married filing jointly You are not eligible for the credit if your AGI exceeds the threshold for your filing status. In addition, you must be at least 18 years old, you cannot have been a full-time student during the calendar year, and you cannot be claimed as a dependent on someone else’s tax return. Advertisement The credit is worth 10% to 50% of the first $2,000 you contribute for the year to a retirement-savings plan, such as an IRA or any employer-based plan, including a 401(k), 403(b), 457 or federal Thrift Savings Plan. The retirement savers’ credit lowers your tax bill dollar for dollar, and it is in addition to any tax benefits you already get for contributing to the retirement plan, such as tax-deductible IRA contributions or pretax contributions to a 401(k) or other employer plan. You can even claim the tax credit if you contribute to a Roth IRA or a Roth account at work. (Roths offer no upfront tax deductions but provide tax-free income in retirement). The lower your income, the higher the credit. If you are at the top of the income limit, you can cut your tax bill by $200. At the lowest income levels, the credit is worth $1,000 ($2,000 for married couples filing jointly). The income limits will increase slightly in 2012, with the credit disappearing when your income tops $28,750 if you are single, $43,125 for heads of household and $57,500 for married couples filing jointly. See 2012 Retirement Account Contribution Limits for more information. Got a question? Ask Kim at firstname.lastname@example.org.