Lawrence & Pearson Associates can assist employers and individuals with the application of this important tax credit.
You may be able to take a tax credit if you make eligible contributions (defined later) to a qualified retirement plan, an eligible deferred compensation plan, or an individual retirement arrangement (IRA). You may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly). This credit could reduce the federal income tax you pay dollar for dollar.
Can you claim the credit? If you make eligible contributions to a qualified retirement plan, an eligible deferred compensation plan, or an IRA, you can claim the credit if all of the following apply.
You were born before January 2, 1991.
You are not a full-time student. (explained later).
No one else, such as your parent(s), claims an exemption for you on their tax return.
Your adjusted gross income (defined later) is not more than:
$53,000 if your filing status is married filing jointly,
$39,750 if your filing status is head of household, or
$26,500 if your filing status is single, married filing separately, or qualifying widow(er).
Full-time student. You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either:
A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or
A student taking a full-time, on-farm training course given by either a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or a state, county, or local government.
You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full time.
Adjusted gross income. This is generally the amount on line 38 of your 2008 Form 1040; line 22 of your 2008 Form 1040A; or line 36 of your 2008 Form 1040NR. However, you must add to that amount any exclusion or deduction claimed for the year for:
Eligible contributions. These include:
Contributions to a traditional or Roth IRA,
Salary reduction contributions (elective deferrals, including amounts designated as after-tax Roth contributions) to:
A 401(k) plan (including a SIMPLE 401(k)),
A section 403(b) annuity,
An eligible deferred compensation plan of a state or local government (a governmental 457 plan),
A SIMPLE IRA plan, or
A salary reduction SEP, and
Contributions to a section 501(c)(18) plan.
They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or section 403(b) annuity. For purposes of the credit, an employee contribution will be voluntary as long as it is not required as a condition of employment.
For a full explaination and assistance please contact