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John F. O'Hara

John F. O'Hara
731 W Skippack Pike  Blue Bell  PA 19422
Phone:  610-277-4060
Office:  215-643-3200
Cell:  267-481-1786
Fax:  267-354-6973

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Taxes and Retirement: The Ins and Outs of the Saver's Credit

February 17, 2016 1:48 am

Have you stepped up your retirement-saving game? Don’t leave that money on the table! According to a recently released survey by the Transamerica Center for Retirement Studies® (TCRS), only one-quarter of low- to moderate-income workers are aware they’re eligible for the Saver’s Credit offered by the Internal Revenue Service (IRS).

"The Saver's Credit is a tax credit,” explains Catherine Collinson, president of the TCRS. “It reduces an eligible taxpayer's federal income tax, making it an important incentive for low- to moderate-income individuals and households to save for retirement in a 401(k), 403(b), IRA, or new myRA. Unfortunately, many eligible workers may be missing out on the Saver's Credit simply because they don't know that it exists."
 
The Saver's Credit may be applied to the first $2,000 of voluntary contributions an eligible worker makes to a 401(k), 403(b) or similar employer-sponsored retirement plan, or an IRA. The maximum credit is $1,000 for single filers or individuals and $2,000 for married couples.

"The Saver's Credit is a tax credit above and beyond the advantage of tax-deferred savings when contributing to a 401(k), 403(b), or IRA,” adds Collinson. “Because this double benefit sounds too good to be true, many eligible savers may be actually confusing the two incentives.”

The credit is available to workers aged 18 years or older who have contributed to a company-sponsored retirement plan or IRA in the past year and meet the Adjusted Gross Income (AGI) requirements. These are:

• Single filers with an AGI of up to $30,500 in 2015 or $30,750 in 2016 are eligible.
• For the head of a household, the AGI limit is $45,750 in 2015 or $46,125 in 2016.
• For those who are married and file a joint return, the AGI limit is $61,000 in 2015 or $61,500 in 2016.

Additionally, the filer cannot be a full-time student or be claimed as a dependent on another person's tax return.

Most workers who are eligible to claim the Saver's Credit are also eligible to take advantage of the IRS Free File program for taxpayers with an AGI of $62,000 or less. Thirteen software companies make their tax preparation software available for free through Free File at www.irs.gov/FreeFile. Bear in mind certain restrictions may apply.

If you are using tax preparation software to prepare your tax return, including those programs offered through the IRS Free File program, use Form 1040, Form 1040A or Form 1040NR. The credit is not available with Form 1040EZ. If your software has an interview process, be sure to answer questions about the Saver's Credit, also referred to as the Retirement Savings Contributions Credit or the Credit for Qualified Retirement Savings Contributions.

“Workers who are eligible to receive the Saver's Credit are at risk of missing it if they use the wrong tax form. The Saver's Credit is not available on Form 1040EZ," says Collinson. “If you are eligible to claim the Saver's Credit, you should use Form 1040, Form 1040A or Form 1040NR.”

If you are preparing your tax returns manually, complete Form 8880, Credit for Qualified Retirement Savings Contributions, to determine your exact credit rate and amount. Transfer the amount to the designated line on Form 1040, Form 1040A or Form 1040NR. If you are using a professional tax preparer, be sure to ask about the Saver's Credit.

Remember to have any refund you receive directly deposited to an IRA to further boost your retirement savings.

Source: TCRS

Published with permission from RISMedia.


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Mortgage Rates Circle Last Year's Lows

February 17, 2016 1:48 am

Mortgage rates have moved lower for the sixth week in a row, prodded by ongoing market volatility, according to Freddie Mac’s recently released Primary Mortgage Market Survey® (PMMS®).

“The 30-year mortgage rate dropped another 7 basis points [last] week to 3.65 percent,” says Sean Becketti, chief economist at Freddie Mac. “[Last] week's drop leaves the mortgage rate just 6 basis points above last year's low of 3.59 percent.”

The average 15-year fixed-rate mortgage (FRM) averaged 2.95 percent with an average 0.5 point, according to the survey, and the average 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent with an average 0.4 point—both decreases.

“In a falling rate environment, mortgage rates often adjust more slowly than capital market rates, and the early-2016 flight-to-quality has run true to form,” Becketti says. “The 30-year mortgage rate has dropped 36 basis points since the start of the year, while the yield on the 10-year Treasury has dropped 59 basis points over the same period. If Treasury yields were to hold at current levels, mortgage rates might well sink a little further before stabilizing.” 

Source: Freddie Mac

Published with permission from RISMedia.


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