Savers Tax Credit question

[hurricanegirl]

Who Can help me determine if I am eligible for the Savers Tax Credit, and I assume as long as I open an IRA prior to 4/15 I could posibly take advantage of this tax credit.

AGI may be close to 27,750 which I believe is the maximum dollar amount to be able to qualify

2010 earnings were approx
$2,000 from PT job
$25,000 from UI
$6,000 interest income
$2,000 pension

My itemized deductions will probably bring that amount down to $28,000 or so - I believe I could also deduct the dollar amount of my IRA contribution, and so I am sure I can get my AGI below 27,750.

Who can advise if I understand this regulation correctly - or possibly correct my misunderstanding.

Also, any sugestions on how much I should contribute to IRA? Are there any tax advantages for the greater contribution? I am thinking a $2,000 contribution, but could go up to $6,000 if necessary/advantageous.

Last question - will this Tax credit also be available in 2011?

I would appreciate answers in "laymans terms", which is why I didnot post on the tax corner boards,,,I hope I dont get moved

I have called my CPA who is "looking into"., but since knowledge is power I thought I should also ask the experts here

Thanks, all

[SVT]

Feb 16, 2011 7:10:40 GMT -5 hurricanegirl said:

Who Can help me determine if I am eligible for the Savers Tax Credit, and I assume as long as I open an IRA prior to 4/15 I could posibly take advantage of this tax credit.
AGI may be close to 27,750 which I believe is the maximum dollar amount to be able to qualify

2010 earnings were approx
$2,000 from PT job
$25,000 from UI
$6,000 interest income
$2,000 pension

My itemized deductions will probably bring that amount down to $28,000 or so - I believe I could also deduct the dollar amount of my IRA contribution, and so I am sure I can get my AGI below 27,750.

Who can advise if I understand this regulation correctly - or possibly correct my misunderstanding.

Also, any sugestions on how much I should contribute to IRA? Are there any tax advantages for the greater contribution? I am thinking a $2,000 contribution, but could go up to $6,000 if necessary/advantageous.

Last question - will this Tax credit also be available in 2011?

I would appreciate answers in "laymans terms", which is why I didnot post on the tax corner boards,,,I hope I dont get moved

I have called my CPA who is "looking into"., but since knowledge is power I thought I should also ask the experts here

Thanks, all

I'm not an expert but yes, it looks to me like you might qualify as far as income goes.

As for the first bolded part, I know that you do have until April 18th.

For the second bolded part, the credit amount is a percent of the amount you saved. If your income is between $18k and $27750, it would be 10% of the amount saved. So yes, the more you save the bigger credit you would receive.

[mwcpa]

the tax corner can explain things in layman's terms, give it a try...and more than likely we will give you the correct/best answer....

here is a link to the IRS website related to the credit...

www.irs.gov/newsroom/article/0,,id=107686,00.html

you need to have an AGI equal to or less than 27750... not taxable income (that's the number you seem to be focusing on).... so look at page one of your 1040, those are the items that add up to AGI... the number at the bottom, AGI, is the key to this credit...

Based on your post your AGI is 35,000 (2+25+6+2).... if you make a full IRA contribution of 5,000 (6,000 if you are over 50) that will bring it down to 30,000... you will not qualify if you are single.

the link I noted give a brief overview of this credit and the form for the credit.

I believe the credit does continue into 2011, but Congress can change the law (they always do) at any point (look at what happened in late December, 2010).

[SVT]

Ahh, missed the AGI part...

[mwcpa]

yes, AGI is the key here... with all of the various benchmarks contained in the law as a determination of when a credit does or does not kick in it is easy to mix them up....

[hurricanegirl]

Yes I am aware AGI must be below 27,750. Btween itemized deductions and up to a 6000 IRA contribution (yes I am over age 55) I can easily do that.

I probably didnot pose my question correctly. I am interested in whether or not I might qualify based on where my earnings come from. ie only $2,000 is from current employ, the rest of my income (UI, Pension and Interest I believe do not qualify)

[mwcpa]

Itemized deductions are not used to compute AGI.... AGI is a computaiton before itemized deductions....not after

[hurricanegirl]

mwcpa - would appreciate one moe from you (or any other knowledge person.)

I just pulled out my 2009 tax return and an -6537 loss was reported, I expect same this year. So my AGI should be about $30,000. A $3000 contribution would then out me at 27,000 AGI

based on my pidlly 2,000 earnings - do you think I might qualify

[mwcpa]

where was the loss created from.... if you have "negative" taxable income that does not necessarily carry over to 2010 from 2009.....

your AGI is not $30K based on what you stated, it is higher....see my previous post where I noted the actual AGI....

If the 6K loss was a qualified net operating loss and you elected to forgo the carry back then your AGI would be 6K lower than I noted previously.

[mithrin]

2 problems:

1. Your AGI is too high. AGI is the last line on the first page of your 1040, it does NOT include itemized (or standard deduction). Not sure what kind of loss you're talking about in #7, but it may not be the same this year or may not be part of the AGI calculation.

2. You can only contribute up to your earned income into an IRA. Since you only had $2000 in earned income last year, that's the most you'll be able to put into an IRA. This is fine from the standpoint of the Saver's Credit, since you only get to claim a credit on the first 2,000 you contribute, but since you AGI is already too high, you won't be able to max out the IRA in order to lower it. You're capped at the 2K of earned income.

[hurricanegirl]

Sorry I do not give enough info up front,,,,I assume everyone is "in my head"

-6357 income was rental income. (line 17, I believe) I do expect the same negative income this year

I do believe I did get the answers I was looking for, and thanks to all who replied

Appreciation to all