College Employees May Be Eligible For a Tax Credit

02/20/04

You may be eligible for a tax credit if you contribute to the Ithaca College Retirement or Tax-Deferred Annuity Plan!

As we enter tax season, most of us are thinking of ways to lower our income taxes. You probably already know that making before-tax retirement contributions can save you money on taxes by lowering your taxable income. But did you know that some people may be able to pay even less federal income tax by taking advantage of the "Saver's Credit"?

The "Saver's Credit" is a tax credit that could reduce the federal income tax you pay dollar-for-dollar. The amount of the credit is based on any employee contributions you make to the Ithaca College Retirement or Tax-Deferred Annuity Plan or an individual retirement arrangement (IRA) and your adjusted gross income. If you qualify, your tax credit rate can be as low as 10 percent or as high as 50 percent, depending on your adjusted gross income -- the lower your income, the higher the credit rate. The credit rate also depends on your filing status. See the tables to determine your potential credit.

The maximum contribution taken into account for the credit for an individual is $2,000. If you are married filing jointly, the maximum contribution taken into account for the credit is $2,000 each for you and your spouse. The Saver's Credit is a "nonrefundable credit," meaning the amount of your Saver's Credit in any year cannot exceed the amount of tax that you would otherwise pay.

To claim the tax credit, if you are eligible, complete and attach IRS Form 8880 ("Credit for Qualified Retirement Savings Contributions") to your federal income tax return (Form 1040 or 1040A). You can print this form and its instructions directly from the IRS website.

Since the College cannot provide tax or legal advice, please consult with your tax preparer if you think you are eligible for the Saver's Credit. You may also direct your questions to the Internal Revenue Service at 1-800-829-1040.

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