2021 Regarding Retirement Credit

This notice explains how you may be able to pay less tax by contributing to a qualified retirement plan or to an Individual Retirement Account (IRA). 

For the tax year 2021, if you make contributions to a retirement plan or an IRA during 2021, you may be eligible for a tax credit, called the “saver’s credit.” This credit could reduce the federal income tax you pay dollar-for-dollar. The amount of credit you can get is based on your contributions and your Adjusted Gross Income (AGI). The tax credit rate can be as low as 10% or as high as 50% of your pre-tax retirement contribution, depending on your Adjusted Gross Income – the lower your income, the higher the tax credit rate. The tax credit rate also depends on your filing status. See the table in this notice to determine your tax credit rate. 

The maximum contribution taken into account for an individual is $2,000. If you are married filing jointly, the maximum contribution taken into account for the credit is $4,000, $2,000 each for you and your spouse. 

The credit is available to you if you: 

  • Are 18 or older,

  • Are not a full-time student,

  • Are not claimed as a dependent on someone else’s return, and

  • Have adjusted gross income (shown on your tax return for the year of the credit) that does not exceed:

    • $66,000 if you are married filing jointly,

    • $49,500 if you are the head of household with a qualifying person, or

    • $33,000 if you are single or married filing separately.

Tax Credit Rates

Married Filing Jointly

AGI

$0 - $39,500 50% of contribution

$39,501 - $43,000 20% of contribution

$43,001 - $66,000 10% of contribution

Over $66,000 credit not available


Head of Household

AGI

$0 - $29,625 50% of contribution

$29,626 - $32,250 20% of contribution

$32,251- $49,500 10% of contribution

Over $49,500 credit not available


Single, Married Filing Separately Or Qualifying Widow(er)

AGI

$0 - $19,750 50% of contribution

$19,751 - $21,500 20% of contribution

$21,501 - $33,000 10% of contribution

Over $33,000 credit not available

Danielle LaFace