Credit for 401(k) contributions


K

Kalyan

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.
 
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H

Harlan Lunsford

Kalyan said:
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.
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
 
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B

Barry Margolin

Kalyan said:
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.
You already have. 401k contributions aren't included in the
taxable wages on your W-2.
 
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B

bono9763

Kalyan said:
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.
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.
 
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M

Mark Bole

Kalyan said:
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.
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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