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The Retirement Savings Tax Credit: A Fact Sheet , Record No.: RS21795, Date: August 07, 2006 1 (August 7, 2006)

handle is hein.tera/crstax0413 and id is 1 raw text is: Order Code RS21795 Updated August 7, 2006 CRS Report for Congress Received through the CRS Web The Retirement Savings Tax Credit: A Fact Sheet Patrick Purcell Specialist in Social Legislation Domestic Social Policy Division Summary The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) authorized a non-refundable tax credit of up to $1,000 for eligible individuals who contribute to an IRA or an employer-sponsored retirement plan. The maximum credit is 50% of retirement contributions up to $2,000. This credit can reduce the amount of taxes owed, but the tax credit itself is non-refundable. The maximum credit is the lesser of either $1,000 or the tax that the individual would have owed without the credit. Eligibility is based on the taxpayer's adjusted gross income. The eligible income brackets are not indexed to inflation. Taxpayers under age 18 or who are full-time students are not eligible for the credit. The credit was first available in 2002, and as enacted in 2001, it would have expired after the 2006 tax year. H.R. 4 of the 109th Congress, as passed by the House of Representatives on July 28, 2006, and by the Senate on August 3, 2006, would make the retirement savings tax credit permanent. The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) authorized a tax credit to encourage low- and moderate-income families and individuals to save for retirement.' Eligible taxpayers who contribute to an individual retirement account (IRA) or to an employer-sponsored plan that is qualified under §401, §403 or §457 of the tax code can receive a non-refundable tax credit of up to $1,000. This credit is in addition to the tax deduction for contributing to a traditional IRA or to an employer- sponsored retirement plan. In determining the amount of the credit, neither the amount of any refundable tax credits for which the taxpayer is eligible nor the adoption credit are taken into consideration. The retirement savings credit was first available in 2002, and as enacted in 2001, it would have expired after the 2006 tax year. Section 812 of H.R. 4 of the 109th Congress, the Pension Protection Act, as passed by the House of Representatives on July 28, 2006, and by the Senate on August 3, 2006, would make the retirement savings tax credit permanent. H.R. 4 would not make the retirement savings tax credit refundable nor index the eligible income brackets to inflation. Taxpayers claim the credit on their federal income tax returns. Taxpayers who contribute up to $2,000 (for all plans combined) to a traditional IRA, a Roth IRA, or an Congressional Research Service Ae The Library of Congress 'The retirement savings tax credit is authorized in the Internal Revenue Code at 26 U.S.C., §25B.

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