You can benefit from a tax credit if you contribute to a given individual retirement arrangement or a retirement plan. However, the amount that you get will greatly depend on your credit rate and the amount that you contribute. The amount that you get in a year cannot exceed the amount of tax that you would have settled on that particular year. You will also not be entitled to tax credit if some other non-refundable credits reduce your tax liability to zero.
For you to claim a tax credit, there are some requirements that you must fulfill…
You should not be fully enrolled as a student- a full time student is one who is in a school with other regular students. There should also be some teaching staff who should be assisting in going through the course study. You are also a full time student if you are enrolled full time in a training course that is being offered by local government, state or a county. The period put into consideration in both cases is five months and these do not necessarily need to run consecutively.
Adjusted Gross Income (AGI) – for you to claim a tax credit, your AGI should not exceed:
- $56,500 when you are married but filing jointly
- $42,375 when you are filing as household head
- $28,250 when you are married but filing separately and if you are single or a widow/widower
How much credit can you get?
As stated earlier, the amount that you can receive on tax credit will depend on the credit rate that you have and the amount that you contribute. The credit rate on the other hand depends on the filing status together with the income of the individual involved and this can fall anywhere between 10% and 50%. You can easily search online for a form that will help you in calculating your credit rate if you need to know this.
If you have a retirement plan that you contribute to, you should know that it is possible to claim some tax credit and this can really help you to sort out some financial needs rather than applying for funding. You shouldn’t be afraid of claiming such as this will not have any effect on any other tax credits. However, you should ensure that you satisfy all the other mentioned requirements and this will see the whole process run smoothly.