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Tax Credit for Low & Middle-Income Savers

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

Examples: 

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!

Updated by the HRS Web Team, Brigham Young University, Provo, UT 84602 - Copyright 2008. All Rights Reserved.