IRS Publishes Info on EGTRRA Tax Credit
The credit was included in the final version of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The saver’s credit is a nonrefundable income tax credit for taxpayers with adjusted gross income that does not exceed $50,000, equal to a percentage of employee contributions made to an employer-sponsored retirement plan or IRA for taxable years beginning after December 31, 2001, and before January 1, 2007.
The IRS, in Announcement 2001-106, has provided information in question and answer format, including a sample notice that employers can give to employees explaining the credit.
The credit applies to voluntary contributions to the following plan types:
- a 401(k) plan
- a SIMPLE 401(k)
- a section 403(b) annuity
- a 457 plan
- a SIMPLE IRA plan
- a salary reduction SEP
- a traditional IRA
- a Roth IRA
The credit rate can be as low as 10% or as high as 50%, depending on the individual?s adjusted gross income. However, the maximum contribution that can be taken into account for the credit is $2,000 ? double that for those married, filing jointly.