Take Advantage of the Retirement Savers' Tax Credit
Find out whether you qualify for this break and reduce your tax bill.

Who qualifies for the Retirement Savers’ Tax Credit, and how much is it worth?
The Savers’ Credit is a frequently overlooked tax break that provides an extra incentive to contribute to a retirement-savings account, such as a traditional or Roth IRA, a 401(k), a 457, a 403(b) or the federal Thrift Savings Plan. In addition to any tax break you already get for contributing to a retirement plan -- say, tax-deductible IRA contributions or pretax contributions to a 401(k) or other plan -- you can also take a credit that can reduce your tax bill by up to $1,000.
To qualify for the credit on your 2012 tax return, your adjusted gross income must be $28,750 or less if you’re single, $43,125 or less if you file your tax return as head of a household, or $57,500 or less if you are married filing jointly. Also, you must be at least 18 years old, cannot have been a full-time student during the calendar year, and cannot be claimed as a dependent on someone else’s tax return.

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The credit is worth 10% to 50% of up to $2,000 that you contribute to a retirement-savings plan. The lower your income, the higher the credit. If you are 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 for 2013 returns, with the credit disappearing when your income tops $29,500 if you are single, $44,250 for head of household, and $59,000 for married couples filing jointly.
To claim the credit, file Form 8880 with your tax return.
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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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