|Credit Rate||Married Filing Joint (MFJ)||Head of Household||Other Filing Categories|
|50%||up to $31,000||Up to $23, 250||$15,500|
|20%||$31,001 to $34,000||$23,251 to $25,500||$15,501 to $17,000|
|10%||$34,001 to $52,000||$25,501 to $39,000||$17,001 to $26,000|
|0%||over $52,000||over $39,000||over $26,000|
Since the limits are based on AGI, adjustments to income (e.g. tradition IRA contributions, student loan interest, HSA contributions, etc.) may be used to reduce AGI to within the limits. In addition, this is one of the few tax credits ( another being the child tax credit) which applies to the married filing separate (MFS) status. Thus, it may be beneficial to file MFS when the combined AGI is over $52,000 and one spouse has an AGI of less than $26,000.
To me, this a great way to use the government's money to save for retirement. If one qualifies, the government will pay up to $2000 for MFJ filing and $1000 for other filing categories. The credit would be in addition to other tax savings from deferring income when contributing to traditional IRAs and 401Ks.
For more on Crossing Generations, check back every Friday for a new segment.
This is not financial or tax advice. Please consult a professional advisor.
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