I am ready to do taxes for year 2006. I have made contributions to 401(k) retirement plan sponsored by my company during 2006. I am wondering if I can get credit for that contribution. Thank you very much.
If your income was less than certain amounts, then you may qualify for the retirement income credit. See form 8801 and instructions to see if you qualify.
ChEAr$, Harlan Lunsford, EA n LA
You already have. 401k contributions aren't included in the taxable wages on your W-2.
-- Barry Margolin, snipped-for-privacy@alum.mit.edu Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
Your 401k contributions are reported on your W2 in box 12, code D. You should notice that Box 1 Federal wages is lower than Box 3 or 5, SS and Medicare wages, by an amount equal to your 401k contribution. So these contributions have already been subtracted from your taxable wages and aren't being taxed. In addition, if your income is low enough, you may qualify for the Saver's Credit. This is claimed on Form 8880, and is a credit to reduce the amount of tax you have to pay. In order to qualify for this credit, your income has to be less than $25,000 if single, $37,500 if head of household, or $50,000 if married filing jointly.
You will already be deferring income taxes on the contribution due to it being omitted from your W-2 Box 1 wages. If you are below the applicable income threshold, you might be eligible for the saver's credit, although the threshold has not been indexed for inflation and so doesn't work for many taxpayers. It also won't help you if your tax is already less than the amount of the credit. The credit is 50% of qualified contributions for taxpayers with modified adjusted gross incomes (MAGI) not exceeding $30,000 (MFJ), $22,500 (HH), or $15,000 (all others). It goes downhill from there as your income rises, no credit is allowed for taxpayers with MAGIs exceeding $50,000 (MFJ), $37,500 (HH), or $25,000 (all others). I am guessing that many states have no credit at all corresponding to this.
-Mark Bole
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