There was a lot of bustle at the start of the year as the tax season got underway. Deadlines for filing provided guidance on how to comply.
Following the tax calendar is almost as crucial as putting money aside for retirement. When you receive rewards for making this choice, it becomes even more alluring. And the IRS has done precisely this.
To encourage people to make contributions to a retirement account, the retirement savings contribution credit, sometimes known as the “saver’s credit,” was established.
A brief overview of the saver’s credit history
The saver’s credit is a tax benefit that is not refundable and has a maximum value of $1,000 for single filers and $2,000 for joint filers.
Contributions to 401(k), Roth IRA, and other accounts are used to determine the credit’s value.
Ten percent, twenty percent, or even fifty percent of the maximum contribution amount may qualify. It also depends on the individual’s filing status and gross income.
Existing retirement accounts cannot be rolled over. Only those who are 18 years of age or older, not enrolled full-time in school, and have not been shown as dependents on another person’s tax return are eligible for this tax credit.
The IRS establishes an annual adjusted gross income (AGI) cap, which determines the saver’s credit threshold.
The adjusted gross income threshold, or AGI, is applicable to income earned in 2024 that must be reported on tax returns for 2025.
| Filing Status | Contribution Match | AGI Range |
|
Head of Household
|
50% | $34,500 or less |
| 20% |
$34,501 – $37,500
|
|
| 10% |
$37,501 – $57,375
|
|
|
Married Filing Jointly
|
50% | $46,000 or less |
| 20% |
$46,001 – $50,000
|
|
| 10% |
$50,001 – $76,500
|
The value of a 10%, 20%, or 50% contribution to a maximum contribution of $2,000 for single filers or $4,000 for joint filers is used to determine the value of a saver’s credit.
Therefore, if you contribute $1,000 of your $19,000 earnings as a single filer, the total value would be $500.
If the contribution was made to an account that offers a tax deduction, the amount of the contribution may also be deducted from the taxable income.
Submitting all paperwork to the IRS on schedule
The tax deadline will be an additional obstacle if the aforementioned is followed. In several areas, the deadline for filing taxes has been extended, which is good news.
The IRS official website claims that states impacted by the 2024 FEMA (Federal Emergency Management Agency) catastrophe declarations were automatically granted a tax extension through May 1, 2025:
- Florida
- Georgia
- South Carolina
- North Carolina
- Alabama
And then parts of:
- Alaska (Juneau)
- Virginia
- New Mexico (Chaves County)
- Tenneessee
Why did a tax extension benefit certain states more than others?
This extension appears to have been primarily caused by natural disasters. Hurricane Helen’s damage affected all five of the aforementioned states.
Alaska’s Juneau had severe flooding beginning in August 2024. However, those who lived and worked in Chaves County, New Mexico, were negatively impacted by the extreme storms and flooding that occurred in October 2024.
Tax deadlines were further delayed in other states that also experienced natural disasters, including mudslides, landslides, and the destructive wildfires in California’s Los Angeles County.
As long as the person’s or company’s address record reflects this condition, these deadline extensions are applied automatically.
This extension will also apply to people who live outside of the affected areas but have tax records that are within them.
To make sure that the necessary actions can be performed, these people are urged to get in touch with the IRS. Relevant tax deadlines and extensions are regularly added to the list on the IRS website.
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