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Do you work part-time, or earn less than $65,000 a year? If so, you might be eligible to fully or partly claim the saver’s credit – a federal tax credit that gives part-time, low-income, and moderate-income workers an extra incentive to make retirement account contributions.

Unlike a deduction (which simply exempts a portion of your income from being taxed), a credit lets you lower your tax liability, dollar-for-dollar. A $1,000 federal tax credit, for example, saves you $1,000 in federal taxes.

The maximum possible saver’s credit that a household can claim for a year is $2,000. If you contribute to an IRA, a 403(b) or 401(k), a governmental 457(b) plan, a 501©(18) plan, or a SIMPLE IRA or SARSEP, you might be able to take this credit.

An eligible taxpayer can claim the credit for 50 percent, 20 percent, or 10 percent of the first $2,000 directed into a retirement account in a year.

Therefore, the maximum credit amounts that an individual taxpayer can claim per year are $1,000, $400, or $200, respectively. This amount may be doubled for joint filers.

There are three requirements for the saver’s credit?

First, you a) must be at least 18 years old, b) must not be a full-time student, and c) cannot be claimed as a dependent by another taxpayer on his or her federal tax return.

To claim the saver’s credit, fill out Internal Revenue Service Form 8880.

You can work part-time and qualify for the saver’s credit. If you are a married joint filer with a part-time job, chances are you will earn $63,000 or less at that job this year – you could be eligible.

If you are a single filer, work part-time, and earn no more than $31,500 this year at that job, the same could prove true. As a head of household, your limit is $47,250.

You might want to use the saver’s credit creatively.

Do you have a millennial child who should start saving for retirement?

One idea is to loan your child funds to open a traditional IRA and claim the credit, and then, your child can partly repay you when he or she receives the credit.

Alternatively, maybe you would like to fund an IRA, but you are tight on cash. If you file your income taxes early in the tax year, and you denote on your 1040 that you are opening a traditional IRA and claiming the saver’s credit, you can put the refund amount into the IRA before April 15 and get that IRA going.

This tax break is commonly overlooked.

The AARP Public Policy Institute delved into some recent IRS data and found that in 2014, only 5.3 percent of filers claimed the saver’s credit.

Unfortunately, about 9 percent should have. Take a look at this credit, as the federal government is offering to lower your taxes to help you save for retirement.

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Tom and John Mills are registered investment advisers and certified financial planners. Reach them at 254-0155, MillsWealth.com. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group (SWAG), a registered investment adviser.

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