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No. of Recommendations: 6
Jim good to hear from you too!

Jim wrote, "Seems like that would be a pretty small set of people."

Smaller than you can ever imagine. For a few years I helped about 1,000 junior soldiers do their taxes and I found it was very difficult to get the maximum credit.

A single person getting the full 50% tax credit for a $2,000 contribution to a retirement account just can't be done - mathematically impossible. For 2018 the max AGI for which a single tax payer can still get the tax credit for 50% is $19,000. After subtracting the $12,000 standard deduction that leaves taxable income of $7,000 for which the tax due is only $700.

Another problem is that just about every single soldier will have an AGI over $19,000. For junior soldiers some qualified for a 20% or $400 tax credit and pretty much all could qualify for the 10% or $200 tax credit. Still between the tax credit and lower taxes owed a $2,000 contribution could save them $400 to $640 for a contribution to a tax deferred account.

I remember one junior NCO that did get the 50% and $1,000 tax credit because he had been deployed for part of the year and had gotten married upon returning stateside. He asked if they could contribute $2,000 for his wife and get another tax credit. No for a couple of reasons. First she had been a student and second they didn't owe enough tax.

When talking to a company of soldiers about how much tax credit they would probably actually get, one junior soldier said the IRS sounded like Army recruiters in that they made false promises.
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