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Friday, November 18, 2005

Savers credit on taxes

From this cnn article about tax cuts that will be extended by the Senate:

Savers credit: Through 2006, low-income taxpayers may receive a credit (a dollar-for-dollar reduction of the taxes they owe) for contributions they make up to $2,000 to qualified retirement savings plans such as 401(k)s, 403(b)s as well as traditional and Roth IRAs. The Senate bill would extend this provision through the end of 2009.

The credit is available only to those taxpayers with AGIs of $25,000 or less ($50,000 or less for married couples).

The move would reduce federal revenue by an estimated $4.1 billion over five years.

Some of my friends and I are all going to be able to take advantage of this tax credit. All of us will probably earn under 25k AGI this year as well as contribute to some kind of retirement savings plan. I will look into this further.

Edit: AGI is adjusted gross income. Here's an AOL article about how to calculate gross income, adjusted gross income, and taxable income. Basically AGI is calculated by taking gross income (say, your annual salary) and then substracting IRA contributions, Student loan payments, etc etc.

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