Would you like to shave $1,000 off your income tax bill? Would your spouse like to join in the tax savings of up to $2,000 on a joint return? This potential savings comes in the form of a tax credit called the “retirement savings contributions credit” or “saver’s credit.” Unlike a tax deduction, a tax credit is a dollar for dollar reduction of the taxes you owe.
How do you qualify for this credit?
 By contributing to a retirement plan, you could be eligible for the saver’s credit. This includes contributions to both Roth and traditional IRAs. It also includes salary deferrals into SEP, SIMPLE, 401(k), 403(b), and 457 plans.
 How much is the credit?
The credit ranges from 10% to 50% of the first $2,000 contributed to a retirement plan. In other words, the maximum credit is $1,000 for an individual. If you and your spouse both contribute at least $2,000 to your retirement accounts, you could qualify for up to a $2,000 credit on a joint return.
 Are there limitations? 
Like many tax breaks, this credit decreases or phases out entirely once your income reaches certain levels. The credit is not available if 2011 income exceeds $28,250 for individuals, $42,375 for heads of household, and $56,500 for married couples filing a joint return. In addition, you cannot take the credit if you are under age 18, a full-time student, or someone else’s dependent.
 “The saver’s credit is a non-refundable credit. Thus you can not take it if your tax liability has already been reduced to zero by other non-refundable credits,” says Joan Brockman, Tax Specialist with Simons Bitzer & Associates.
Here’s an example. Say you put $3,000 into an IRA and you qualify for the maximum $1,000 saver’s credit. You can deduct your $3,000 contribution for a tax savings of $450 ($3,000 x 15% tax rate). Add this $450 tax savings to the $1,000 saver’s credit, and your total tax savings equals $1,450.
 If you haven’t been contributing to a retirement plan, this tax credit adds yet another incentive to do so. You have until April 16, 2012, to make a 2011 IRA contribution that could reduce your 2011 taxes.
For more information about the saver’s credit or about retirement accounts, contact Simons Bitzer at (317) 782-3070.