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The Retirement Savings Tax Credit: A Fact Sheet , Record No.: RS21795, Date: April 01, 2004 1 (April 1, 2004)

handle is hein.tera/crstax0412 and id is 1 raw text is: Order Code RS21795 April 1, 2004 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 Section 618 of 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 a traditional IRA or an employer-sponsored retirement plan that is qualified under §401, §403 or §457 of the Internal Revenue Code. The credit was first available in 2002. It will expire after 2006 unless extended by Congress. The maximum credit is 50% of retirement contributions up to $2,000. The saver's 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. Taxpayers under age 18 or who are full-time students are not eligible for the credit. This report will be updated in the event of legislative action affecting the saver's credit. Section 618 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) authorized a retirement savings tax credit to encourage low- and moderate - income families and individuals to save for retirement. Eligible taxpayers who contribute to a traditional 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 saver's credit, neither the amount of 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 will expire after 2006 unless extended by Congress. Taxpayers claim the credit on the income tax return they file with the Internal Revenue Service (IRS). Individuals who contribute up to $2,000 (for all plans combined) to a traditional IRA or to an employer-sponsored retirement plan receive a proportional credit that reduces the amount of income tax they owe. The maximum credit is the lesser of $1,000 or the amount of tax that would have been owed without the credit. The percentage of a contribution that can be claimed as a credit declines as income increases. For single workers with adjusted gross incomes under $15,000 and families with incomes Congressional Research Service ** The Library of Congress

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