3607. What is the saver’s credit and who can claim it?Nuco Employeercline202015-06-04T19:13:00Z2015-06-04T19:13:00Z37764429Hewlett-Packard3610519514Site Map/Individual Retirement Plans/Roth IRA/In GeneralSite Map/Individual Retirement Plans/Traditional IRA/In Generalindividual retirement account annuity2005-01-25T00:00:00ZTaxFactsDefaultArticle114660213-00-tf1.xml214.00;#1812;#1821;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1What is the saver’s credit and who can claim it?79100.0000000000TaxFactsDefaultArticle2010-06-04T11:15:05ZSBMEDIA\cjump0f08e536-ecc3-4201-b7c3-d3285df31d4d|e397f4f8-7604-4866-8476-e67ae2709435|f65e5ef6-4314-4ecd-8314-071073c665903607. What is the saver’s credit and who can claim it?The Saver’s Credit (formally known as the Retirement Savings Contributions Credit) permits certain lower-income taxpayers to claim a nonrefundable credit for qualified retirement savings contributions..IRC Sec. 25B. Qualified retirement savings contributions include contributions to Roth or traditional IRAs, as well as elective deferrals to a 401(k) plan (Q 3697), an IRC Section 403(b) tax sheltered annuity (Q 3909), an eligible Section 457 governmental plan (Q 3568), a SIMPLE IRA (Q 3654), and a salary reduction SEP (Q 3653). Voluntary after-tax contributions to a qualified plan or Section 403(b) tax sheltered annuity are also eligible for the credit..IRC Sec. 25B(d)(1); Ann. 2001-106, 2001-44 IRB 416, A-5. The fact that contributions are made pursuant to a negative election (i.e., automatic enrollment) will not preclude a participant from claiming the saver’s credit..See Ann. 2001-106, 2001-44 IRB 416. Contributions made to an IRA that are withdrawn, together with the net income attributable to such contribution, on or before the due date (including extensions of time) for filing the federal income tax return of the contributing individual are not considered eligible contributions..See Ann. 2001-106, 2001-44 IRB 416, A-5.The amount of the credit is limited to an applicable percentage of IRA contributions and elective deferrals up to $2,000. The applicable percentages for 2015 are as follows: .IR 2013-86.ADJUSTED GROSS INCOMEJoint returnHead of a householdAll other casesApplicableOverNot overOverNot overOverNot overPercentage0$36,5000$27,3750$18,25050%36,50039,50027,37529,62518,25019,75020%39,50061,00029,62545,75019,75030,50010%61,00045,75030,5000%For example, Jim is married and earned $30,000 in 2015. Jim’s wife was unemployed in 2014 and didn’t have any earnings. Jim contributed $1500 to his IRA in 2015. After deducting his IRA contribution, Jim’s AGI shown on his joint tax return is $28,500. Based on the applicable percentages allowed, Jim may claim a 50% saver’s credit --$750—for his $1500 IRA contribution.The income limits are indexed for inflation..IRC Sec. 25B(b)(3). For this purpose, adjusted gross income is calculated without regard to the exclusions for income derived from certain foreign sources or sources within United States possessions..IRC Sec. 25B(e).In calculating the saver’s credit, the total contributions made to qualified retirement account in a given year must be reduced by recent distributions received by the taxpayer during the prior two taxable years and the current taxable year for which the credit is claimed, including the period up to the due date (plus extensions) for filing the federal income tax return for the current taxable year. Distributions received by the taxpayer’s spouse during the same time period are also counted if the taxpayer and spouse filed jointly both for the year during which a distribution was made and the year for which the credit is taken. .See Ann. 2001-106 Q-4. Example: Jane contributes $3,000 to her 401(k) in 2015, but had taken a $500 withdrawal from her IRA during 2015 and $900 withdrawal during 2014, neither of which were rolled over to another IRA. Jane’s 2015 retirement contributions eligible for the saver’s credit is $1600 ($3000-$500-$900) instead of the $2,000 (the max credit) otherwise available to Jane. If Jane’s AGI entitles her to a 50% credit, her credit will be equal to $800 ($1600 x 50%). Corrective distributions of excess contributions and excess aggregate contributions (Q 3733), excess deferrals (Q 3705), dividends paid on employer securities under Section 404(k) (Q 3746), and loans treated as distributions (Q 3848) are not taken into account..IRC Sec. 25B(d)(2); Ann. 2001-106, above, A-4.To be eligible to claim the credit, the taxpayer must be at least 18 as of the end of the tax year and must not be claimed as a dependent by someone else or be a full-time student. Full-time students include any individual who is enrolled in school during some part of each of five months during the year and is enrolled for the number of hours or courses the school considers to be full-time..IRC Sec. 25B(c); Ann. 2001-106, 2001-44 IRB 416, A-2.Taxpayers have until April 15, 2016, to contribute to traditional and Roth IRAs and still claim the credit on their 2015 tax returns.For married taxpayers filing jointly, contributions by or for either or both spouses, up to $2,000 per year for each spouse, may give rise to the saver’s credit..Ann. 2001-106, 2001-44 IRB 416, A-9.