Important - This may save you money!
The Tax Relief Act of 2001 provides an additional incentive for some BYU personnel to participate in retirement savings plans. Low and middle-income savers may be eligible for a special tax credit called the "Saver's Credit." Remember, a tax credit is a dollar elimination of tax liability, which is even more valuable than a tax deduction!
Here's How It works:
The tax credit may be as low as 10% or as high as 50% (to a maximum of $2,000) depending on your adjusted gross income in 2008. The tax credit is available if you:
- Are age 18 or older.
- Are not a full-time student.
- Will not be claimed as a dependent on someone else's tax return.
- Have a federal tax liability for 2008.
- Have an adjusted gross income on your 2008 tax return within the parameters listed below.
Adjusted Gross Income:
|Single||Head of Household||Married Filing Joint||Credit|
|$0 - $16,000||$0 - $24,000||$0 - $32,000||50% of Contribution|
|$16,001 - $17,250||$24,001 - $25,875||$32,001 - $34,500||20% of Contribution|
|$17,251- $26,500||$25,876 - $39,750||$34,501 - $53,000||10% of Contribution|
|Over $26,500||Over $39,750||Over $53,000||Not Available|
|Filing Status||Adjusted Gross Income||Personal Contribution||Matching Contribution||Tax Credit|
|*Married/Joint||$30,000||5% ($1,500)||4% ($1,200)||50% ($750)|
|**Single||$16,250||5% ($812)||4% ($650||20% ($162)|
* The first example shows a married couple investing $1,500 of their own money in the DMBA Thrift Plan. They will receive the University matching contribution of $1,200 for a total contribution of $2,700. After receiving their tax credit of $750, the net cost of their investment is $750. ($1,500 personal investment - $750 tax credit = $750 total cost). What a bargain!
**Similarly, the second example shows a single person investing $812 of his or her own money in the DMBA Thrift Plan. This employee will receive the University matching contribution of $650 for a total contribution of $1,462. After receiving the tax credit of $162, the net cost of the investment is $650. ($812 personal investment - $162 tax credit = $650 total cost).
At tax time, remember to inform your tax preparer that you may qualify for the Saver's Credit!