Kathleen and Glenn decide that this the year to begin getting serious about savi
ID: 2387970 • Letter: K
Question
Kathleen and Glenn decide that this the year to begin getting serious about saving for their retirement by participating in their employers' 401 (K) plans. As a result they each have $3,000 of their salary set aside in their qualified plans.A. Calculate the credit fro certain retirement plan contributions available to Kathleen and Glenn if the AGI on their joint return is $35,000.
B. Kathleen adn Glenn persuade their dependent 15-year-old son, joel, to put $500 of his part-time earnings into a Roth IRA during the year. What is the credit for certain retirement plan contributions available to Joel? His AGI is $7,000.
Explanation / Answer
a. Eligible contributions are limited to $2000 per year for each individual. If Glenn and Kathleen each contribute $3,000, their eligible contributions would each $4,000 (2000 for each). For married filing joint with an AGI of 35,000, their credit rate would be 20%. So their credit would be 0.20*4,000 = $800. Answer : $800. b. Joel gets no retirement savers credit. To qualify for the credit, you must be at least 18 years of age by the end of the year, you cannot be a dependent claimed on another person’s return, and you cannot be a full-time student. Answer: $0.
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