Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I have a question about the savers credit, available to us making under 25,000 (single) but still able to contribute to a retirement account. I've read that it can only be used to reduce what you owe, & won't add any if you are getting a refund. does that mean I need to adjust my w4 to make sure I owe money at the end of the year to be eligble? if correct, that seems ridiculusly difficult. thanks
Print the post Back To Top
No. of Recommendations: 0
Credits which can not reduce the amount of your taxes below zero are 'non-refundable' credits. It is not related to the amount of your withholding but to the total taxes due.

A credit is a 'refundable' credit if it is possible for the credit to exceed taxes due and the difference would be paid. I believe, EIC is in this category.

Debra
Print the post Back To Top
No. of Recommendations: 0
I have a question about the savers credit, available to us making under 25,000 (single) but still able to contribute to a retirement account. I've read that it can only be used to reduce what you owe, & won't add any if you are getting a refund. does that mean I need to adjust my w4 to make sure I owe money at the end of the year to be eligble? if correct, that seems ridiculusly difficult. thanks

The saver's credit is non-refundable. This means that it can be used to reduce your tax liability (not what you owe at the end of the year). If your tax liability is reduced "below" $0, you don't get the excess refunded to you. The key number you are looking at is line 55 (2002 Form 1040), not line 73.

Ira
Print the post Back To Top
No. of Recommendations: 0
just to clarify what others have said: the issue of refundable vs. non-refundable has nothing to do with whether or not you are getting a refund. what "refundable" means is that even if your tax liability (not how much you owe at the end of the year) is zero, you can use the refundable credit to get it below zero (so the irs owes you money even if you didn't pay them anything). it's a very strange concept, which i first heard of a few months ago when the irs notified me that i didn't take my refundable "additional child tax credit".

it sounds like this particular credit (i know nothing about it) is not refundable, which is probably the source of the wording "can only be used to reduce what you owe". that is, can only be used to reduce what you owe, as opposed to a refundable credit, which can be used to reduce what you don't owe!

c.
Print the post Back To Top