The Saver's Credit

If you're broke but still saving for retirement, there's a new credit just for you.

The Saver's Credit is a dollar-for-dollar tax credit based on money a taxpayer contributes to a qualified retirement savings plan -- either an IRA or employer-sponsored retirement plan. For every dollar you put into one of these plans, you get a credit (essentially, a coupon) that reduces the tax you owe by $1 -- to a maximum $1,000. The credit is available only to single taxpayers with adjusted gross income (AGI) of $25,000 or less, or married couples with an AGI of $50,000 or less.

If you qualify, though, you're able to benefit twice from saving for retirement -- the credit applies to pretax contributions as well. So you can reduce your taxable income by contributing pretax money to a retirement plan, then reduce the tax owed.

Taxpayers have until April 15, 2003, to take advantage of the Saver's Credit on their 2002 tax return.