Posts Tagged "tax credit"

Think of Saver’s Tax Credit as Free Money

Life’s unpleasant surprises – a new set of tires or a big vet bill – can get in the way of saving money for retirement. This is especially true for low-income workers.

But if they are able to save a little here and there, the federal government provides a very big assist through its Saver’s Credit. Unfortunately, low-income workers are also the least likely to be aware the tax credit exists.

Savers credit tableHere’s how the Saver’s Credit works. The IRS returns half of the amount saved over the year – up to certain limits – by a head of household earning less than $29,626 or a couple earning less than $39,501.

So, the head of household with earnings under the income limit who saves $2,000 in a tax-exempt retirement plan like an IRA or an employer 401(k) would get back the IRS’ maximum credit of $1,000. And the couple that saves $4,000 would get back the $2,000 maximum.

Piggy bankGranted, these are very large sums for low-income workers. But if they can manage to save a little bit every week, the Saver’s Credit is effectively free money from the federal government.

Smaller tax credits are available to people with slightly higher incomes. Individuals and couples do not qualify if they earn more than $49,500 and $66,000, respectively.

Unfortunately, only about a third of households earning under $50,000 are aware of the credit, according to a Transamerica Institute survey.

Now that you know, start saving. You’ll get a big chunk of it back. …Learn More

A drawing of a hand holding a heart

States Give Financial Help to Caregivers

On Jan. 1, Arizona residents caring for elderly or disabled family members became eligible for up to a $1,000 reimbursement from the state for expenses incurred in their caregiving responsibilities.

This is a trial program and the legislature allocated very little money – $1 million over two years – in a state with an estimated 800,000 residents caring for a disabled adult over 18.

But it’s a start.

Caregivers “aren’t asking for everything. They’re asking for a little bit to make their lives better,” said Elaine Ryan, vice president of government affairs for AARP, which has been on the forefront of advocating for such policies at the state level. “That’s the least we can do.”

Arizona’s program would defray a portion of caregivers’ spending. For older family members, this would cover technologies to aid older family members, such as hearing aids or computer programs, or shower grab bars and wheelchair ramps.

Graphic of caregiver expenses

Like Arizona, state governments around the country, as laboratories for policy experimentation, have passed a hodgepodge of programs to support caregivers. Other bills approved in recent years range from New Jersey’s tax credit for military families caring for wounded veterans to Oregon’s paid family leave program for workers taking care of aging spouses, parents and grandparents.

The programs are a tacit acknowledgment of the enormous financial strain caregivers face – a strain that is only expected to grow and, increasingly, to affect Millennials as their baby boomer parents age.

However, it’s not easy to pass bills that require states to approve financial assistance or tax credits, because the work done quietly by family caregivers is often invisible and under-appreciated by the general public and federal and state legislators. …Learn More