110th CONGRESS, LEGISLATIVE ISSUES A - Z
RETIREMENT SAVINGS TAX CREDIT (SAVER’S CREDIT)
ISSUE: The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (P.L.107-16) included a provision to encourage retirement savings among lower and middle-income individuals. This Retirement Savings Tax Credit, or “Saver’s Credit”, allows tax filers to credit up to $1000 to offset any tax liability they may have.
To claim the maximum credit, $2,000 in contributions must made to either a traditional or Roth Individual Retirement Accounts (IRAs) or other qualified employer-sponsored retirement plans such as 401(k)s, 403(b)s, annuities, SIMPLEs and SEPs.
The Saver’s Credit is only available to filers whose adjusted gross income (AGI) falls below a certain dollar amount. The full $1000 credit is available only to individual filers with an AGI below $15,000 ($22,000 for heads of household and $30,000 for married couples filing jointly). The credit is then reduced as AGI increases. Individuals with AGIs exceeding $25,000 ($37,500 for heads of household and $50,000 for married couples filing jointly) are ineligible for the credit.
Minors and full-time students are ineligible for the tax credit.
CUNA POSITION: The Saver’s Credit is an ideal way for lower and middle-income individuals and families to both save for their retirement as well as lower their tax liability. CUNA strongly supports increasing the amount of the credit and those taxpayers eligible.
IMPACT ON CREDIT UNIONS: Credit union members benefit from additional retirement savings and lower tax liabilities. Credit unions benefit from offering these IRAs because of the additional deposits that follow as a result.
STATUS/OUTLOOK: On August 17, 2006, the Pension Protection Act of 2006 (H.R. 4) was signed into law by President Bush. The Act makes permanent the Saver's Credit.
Also, the President’s Advisory Panel on Federal Tax Reform issued its final report on November 1, 2005. The Panel recommended making the credit refundable, permanent, and applicable to 25% of contributions up to $2,000 annually. The credit would be incrementally reduced if tax filers make more than $15,000 a year ($30,000 for married couples). The Panel recommended that no taxpayers making more than $25,000 ($40,000 for married couples) be allowed to claim the credit.
CONTACT: John Hildreth, (202) 508-6724, jhildreth@cuna.coop
RELATED DOCUMENTS:
June 21, 2006: Letter to Pension Reform Conferees Regarding Details of Final Conference Report
