IRA Tax Credit

What is the IRA Tax Credit?
Families at lower to moderate income levels have a tax incentive to save for retirement. The IRA tax laws allow eligible participants of Traditional IRAs, Roth IRAs, and 401(k)plans, to receive a tax credit of up to $1,000 for their contribution. (The tax credit can only be applied to the first $2,000 of the contribution).

Who is eligible?

To qualify for the tax credit, the IRA holder must:

• Be 18 years old before the end of the taxable year;
• Not be a full-time student or a dependent;
• Be within the Adjusted Gross Income (AGI) limits.

2008 AGI Limits to Qualify for an IRA Tax Credit

Joint Return	Head of Household	Single Filers and other cases	Tax Credit Percent
Up to $32,000	Up to $24,000	Up to $16,000	50%
$32,001 to $34,500	$24,001 to $25,875	$16,001 to $17,250	20%
$34,501 to $53,000	$25,876 to $39,750	$17,251 to $26,500	10%
$53,001 and over	$39,751 and over	$26,501 and over	0%

How does it work?
Suppose you are married and filing a joint tax return. Your combined adjusted gross income for 2008 is $33,000. If both you and your spouse make your $5,000 contribution to either a Roth or Traditional IRA , you would be eligible for a $400 per spouse (20% of $2,000) non-refundable tax credit. If the contribution is to a Traditional IRA, your contribution would also be fully tax deductible.

The above is general information regarding the IRA tax credit, and does not take your unique, personal circumstances into account. It is not intended to be complete and should not be relied upon in making final decisions concerning IRA accounts. The information is not meant to constitute legal or tax advice. Please contact your tax professional for full details or visit the IRS website at www.irs.gov.