IRA question

[Plain Old Petunia]

You would save less than that since only some of that 5k is in the 10% bracket. (Standard deduction for single is 5700, personal exemption is 3650, so the first 9350 of income is in the 0% bracket).

May as well put 1650 into traditional IRA, 3350 into Roth.

ETA: Oh wait, are you saying you have 11k after your sd and pe? Then yes, you will save $500 on your 5k contribution.

Sometimes you can be over the threshold for a credit with no phase-out range. If this applies to you, and 5k will get you under the threshold, then you will save more than just your marginal tax rate.

[Plain Old Petunia]

Gotcha. Yes, you have it right.

[robbase]

you qualify for the savers credit

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

You may be eligible for a tax credit if you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. Here are six things the IRS wants you to know about the Savers Credit:

Income Limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:

• Single, married filing separately, or qualifying widow(er), with income up to $27,750

• Head of Household with income up to $41,625

• Married Filing Jointly, with incomes up to $55,500


Eligibility requirements To be eligible for the credit you must have been born before January 2, 1993, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.


Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.


Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.


Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.


Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.


For more information, review IRS Publication 590, Individual Retirement Arrangements (IRAs), Publication 4703, Retirement Savings Contributions Credit, and Form 8880. Publications and forms can be downloaded at www.irs.gov or ordered by calling 800-TAX-FORM (800-829-3676).

[qofcc]

If you're in the 10% bracket, pay the tax and contribute to a Roth. It's unlikely you'll ever be in a lower tax bracket.

[Deleted]

retirement saver's tax credit

[Savoir Faire-Demogague in NJ]

If you're in the 10% bracket, pay the tax and contribute to a Roth. It's unlikely you'll ever be in a lower tax bracket.

I agree with this strategy.