Internal Revenue Service, Orthocoronavirinae, Pension, 401(k), Finance, Individual retirement account

Today I’m gonna talk about how to use the individual retirement account with this savers credit for 2018 now this is gonna. Help you save up to two thousand dollars and it doesn’t matter if you use. A 401k an IRA or a Roth IRA I’m gonna. Show you how to save up to two thousand dollars now there’s your first time at our channel or you haven’t subscribed click on the subscribe button at the bottom my name is Travis. Sickles certified financial planner with sickle on or financial advisors the two types that are very popular of retirement accounts that we deal with are the.

IRS so we’re dealing with the traditional IRA versus a Roth IRA the traditional IRA goes in pre-tax gross tax deferred. And then comes out as ordinary income so what does that look like if you. Take $2,000 and put it into a traditional IRA it reduces your taxable income so what does it mean if you make $40,000 and you put $2,000 into an IRA a traditional IRA then. Your actual taxable income is only thirty eight thousand so it’s reduced by the amount that you put into the traditional IRA on the other side the Roth. IRA a very powerful retirement tool but it doesn’t reduce your taxable income today what it does is. The money that you put in grows tax-deferred and then comes out tax-free so all the growth is not taxable to very powerful retirement plans but.

Internal Revenue Service, Orthocoronavirinae, Pension, 401(k), Finance, Individual retirement accountWhat does it have to do with the savers credit or saving $2,000 on your taxes well here’s how it works the savers credit says that if you make. Under a certain amount of money then you can actually write off up to. Fifty percent up to two thousand dollars so if we put two thousand dollars into a traditional IRA and reduce our taxable. Income then we could take 50% so what does that mean 2,000 goes into. The traditional IRA or the Roth IRA it doesn’t matter then we could take 50% and. Write it off on our taxes so it reduces our taxable income it’s a credit so if let’s say you owe the IRS it is a credit so.

Internal Revenue Service, Orthocoronavirinae, Pension, 401(k), Finance, Individual retirement account Business NewsLet’s say that you have a tax liability of three thousand dollars you put two thousand dollars into the traditional or Roth IRA then fifty percent of that goes against. That three thousand dollars so now you only have to pay two thousand. Dollars in tax it’s not three thousand now again there’s.

Internal Revenue Service, Orthocoronavirinae, Pension, 401(k), Finance, Individual retirement account NewsIncome limit so let’s I’m gonna pop up on the screen right here so you can see what the savers credit numbers are so the fifty percent contribution that. Goes against your taxes is if you make thirty eight thousand dollars or less now if you make up the sixty three thousand then you can do the ten percent so the ten percent well. That last line right there that zero percent that you can see at the bottom means if you make sixty three thousand over sixty three thousand so if you do end.

Up making an adjusted gross income of sixty three thousand but then you can still do. This here’s a super important point that you need to understand when you’re looking at these numbers. Because you might look at these numbers and say wait a second we make more than sixty three thousand this doesn’t apply to. Me not necessarily true because every dollar that you put into your 401 K will reduce your just a gross income these are the just addressed income numbers so if you.

Can get that income below then you can get additional money off on your taxes from the savers credit but you need to apply for it it’s all it is is one form it. Goes right on your 1040 but the form that you need to fill out is the 8880 form eighty eight eighty that is the form that’s gonna. Do the savers credit it’s on line fifty one of your 1040 and you can reduce your taxes so how do. You get to the full two thousand dollars well married filing jointly that means you could save up to four thousand dollars to get. The write-off or to get the tax credit so for the two thousand dollar. Tax credit that means you need to have married filing.

Jointly and you need to save at least four thousand dollars now if you saved more than that that’s great but you only get the credit up to two thousand dollars. Her individual so married filing jointly that’s $4,000 now if you’re single starting out working maybe you’re not gonna make. A ton of money this year and you’re gonna fall within these income limits is an excellent opportunity to get a little bit more money off on your taxes or. Get a bigger refund now this is a non-refundable credit but it can help you reduce all your other tax liabilities so savers credit is a great. Opportunity it doesn’t matter if you want to use the traditional or Roth or a 401k SEP simple it doesn’t matter as long as it’s a qualifying retirement plan then. You can use it and you can get this tax credit now let’s say you.

Make $100,000 how can you get it to these limits you can max out your 401k if you max it out you’re married filing jointly eighteen thousand five. Hundred times two that’s thirty seven thousand that gets you to the sixty three thousand so really if you’re trying to get to retirement as fast as possible. Then you want to make sure that everything that hits the bottom line on your tax return is money that. You’re living on and everything else should go to retirement savings so if you’re a really aggressive saver saving that thirty seven thousand get you to the sixty three.

And if you make less than that the more money you put in the. More money you’re going to be able to get in a credit there’s a. Couple things you need to know you can’t be a dependent and you can’t be a student so you can’t be a student who’s a part-time job and then save it.

And expect to get the credit you can’t do that so if you if you’re looking at this and you’re at the 50% threshold that means you’re getting. A hundred percent rate of return that means that for. Every dollar you put into your retirement plan up to the two thousand dollars then you’re going to get that credit so it’s this it’s basically the same as getting a hundred percent rate of. Return by getting yourself to safe and you can reduce your tax liability so it’s a win-win so if you do a traditional. IRA it’s gonna reduce your taxable income plus you’re going to get this credit so there’s a lot of benefits that.

You’re getting from this savers credit that you need to make sure you’re taking advantage of if you’ve enjoyed this video be sure to subscribe and leave your comments down at the bottom.