Credit for Qualified Retirement Savings Contribution
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Definition: Credit for Qualified Retirement Savings Contribution
The retirement saving contributions credit is also known as savers credit or IRS Form 8880. This is used to calculate the amount of savers credit for an individual or for a married couple, who have made eligible contributions to certain tax-advantaged retirement plans.
It is one of the several tax benefit scheme designed to aid low income group save for the retirement. So here the taxes are deferred on the money put away for the retirement years. Since it is not a deduction but a credit, it is very beneficial.
Income tax deduction actually decrease your real income whereas credit is cleared after you calculate the amount you owe and thus the revenue service bill is reduced.
For example: If you owe Rs 1000, and are eligible for Rs500 credit, you will be at last paying only Rs500.This is the benefit of getting credit in this retirement saving contribution.
There are various guidelines for applying for credit for qualified retirement savings contribution. One person has to be eligible and can avail only a maximum credit of 50% contribution for people in the lower end of the earning ranges. Also the filler should be not less than 18 years of age and should not be a full- time student or be claimed as a dependent on another person’s tax return.