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by Devon Weaver, Keeping Tabs Accounting
Plan Now To Get Full
Benefit Of Saver’s Credit
The saver’s credit helps offset part
of the first $2,000 workers voluntarily
contribute to IRAs and to 401(k) plans
and similar workplace retirement
programs. Also known as the retirement savings contributions credit, the
saver’s credit is available in addition to
any other tax savings that apply.
Eligible workers still have time
to make qualifying retirement contributions and get the saver’s credit
on their 2011 tax return. People have
until April 17, 2012, to set up a new
individual retirement arrangement or
add money to an existing IRA and still
get credit for 2011. However, elective
deferrals must be made by the end of
the year to a 401(k) plan or similar
workplace program, such as a 403(b)
plan for employees of public schools
and certain tax-exempt organizations,
a governmental 457 plan for state or
local government employees, and the
Thrift Savings Plan for federal employees. Employees who are unable to set
aside money for this year may want to
schedule their 2012 contributions soon
so their employer can begin withholding them in January.
The saver’s credit can be claimed:
•
Married couples filing jointly with
incomes up to $56,500 in 2011 or
$57,500 in 2012;
•
Heads of Household with incomes
up to $42,375 in 2011 or $43,125
in 2012; and
•
Married individuals filing separately and singles with incomes up
to $28,250 in 2011 or $28,750 in
2012.
Like other tax credits, the saver’s
pg 12 · The Hometown Treasure · Jan. ‘12
credit can increase a taxpayer’s refund
or reduce the tax owed. Though the
maximum saver’s credit is $1,000,
$2,000 for married couples, you are
cautioned that it is often much less
and, due in part to the impact of other
deductions and credits, may, in fact, be
zero for some taxpayers.
The saver’s credit supplements
other tax benefits available to people
who set money aside f or retirement.
For example, most workers may deduct
their contributions to a traditional
IRA. Though Roth IRA contributions
are not deductible, qualifying withdrawals, usually after retirement, are
tax-free. Normally, contributions to
401(k) and similar workplace plans are
not taxed until withdrawn.
Other special rules that apply to
the saver’s credit include the following:
•
Eligible taxpayers must be at least
18 years of age.
•
Anyone claimed as a dependent on
someone else’s return cannot take
the credit.
•
A student cannot take the credit.
A person enrolled as a full-time
student during any part of five
calendar months during the year is
considered a student.
•
Certain retirement plan distributions reduce the contribution
amount used to figure the credit.
For 2011, this rule applies to distributions received after 2008 and
before the due date, including extensions, of the 2011 return. Form
8880 and its instructions have
details on making this computation.
Tax Corner
2012 Standard Mileage
Rates, Most Rates
The 2012 optional standard mileage
rates used to calculate the deductible
costs of operating an automobile for
business, charitable, medical or moving purposes are beginning on Jan. 1,
2012, the standard mileage rates for
the use of a car (also vans, pickups or
panel trucks) will be:
•
55.5 cents per mile for business
miles driven
•
23 cents per mile driven for
medical or moving purposes
•
14 cents per mile driven in service of charitable organizations
The rate for business miles driven is
unchanged from the mid-year adjustment that became effective on July 1,
2011. The medical and moving rate has
been reduced by 0.5 cents per mile.
The standard mileage rate for business is based on an annual study of the
fixed and variable costs of operating
an automobile. The rate for medical
and moving purposes is based on the
variable costs as determined by the
same study. Independent contractor
Runzheimer International conducted
the study.
Taxpayers always have the option of
calculating the actual costs of using
their vehicle rather than using the
standard mileage rates.