However, the IRS only allocates an estimated $1 billion per year for the credit. Even though it has rewarded moderate-income individuals, Iwry believes the vehicle should be greatly improved and expanded. Currently, eligible taxpayers only benefit if they owe taxes, because it reduces consumers’ tax liability.
Rep. Benjamin L. Cardin (D-Md.) maintains that the measure has broad support in Congress, and the House Ways and Means Committee is weighing his amendment to allow taxpayers to apply the credit directly to their retirement accounts, which will make it easier for all Americans to save for retirement. Asserts Cardin: “My goal is to improve the Saver’s Tax Credit by expanding it, making it fully refundable, and permanent. A fully refundable credit would be available to more than 100 million Americans, the vast majority of whom have low and moderate incomes.”
If the credit becomes permanent, it will make it a bit easier for millions of taxpayers such as Alexander to secure their financial future.
Saver’s Tax Credit
Adjusted Gross Income range for:
|
Joint Filers |
Heads of households |
Singles |
| $0 — $30,000 | $0 — $22,500 | $0 — $15,000 |
| $30,001 — $32,500 | $22,501 — $24,375 | $15,001 — $16,250 |
| $32,501 — $50,000 | $24,376 — $37,500 | $16,251 — $25,000 |
| Credit rate | Tax Credit for $2,000 contribution | After-tax cost incurred by individuals to create $2,000 account balance | Effective after-tax matching rate |
| 50% | $1,000 | $1,000 | 100% |
| 20 | 400 | 1,600 | 25 |
| 10 | 200 | 1,800 | 11 |