Let’s face it. We as Americans don’t save enough as we should. Recently I read that the average American worker has approximately $35,000 set aside for retirement. Even if your account is much higher, let’s say over $100,000 when you factor inflation, taxes and unexpected emergencies, one still needs to set aside more. This is especially true for business owners.
Fortunately Congress, surprisingly as it may seem, has approved a Retirement Savings Tax Credit. To refresh your memory, a tax credit is a dollar-for-dollar decrease of your tax bill. It is very different from a tax deduction.
What was put into law was a Retirement Savings Incentive Act. In summary, if a married couple, filing jointly and earning up to $62,000 annually, contributes to an employer sponsored retirement plan, they will receive a 10% tax credit. This may not seem like much but when added year after year it does amount to something much bigger. Such a program applies to 401(k) plans, Simple and SEP IRA’S. Now with tax season upon us this a perfect time to add to your retirement plan or even to start a retirement plan.