Question

Exercise 12-19 (LO. 4) Rafael and Lucy Gonzalez, married taxpayers, each contribute $2,900 to their respective...

Exercise 12-19 (LO. 4) Rafael and Lucy Gonzalez, married taxpayers, each contribute $2,900 to their respective § 401(k) plans offered through their employers. The AGI reported on the couple's joint return is $39,000. Click here to access the "Saver's" Credit Rate and AGI Thresholds Table. As a result, they may claim a credit for their retirement plan contributions of $ ?

Homework Answers

Answer #1

Person eligible for Retirement saving contribution credit:

  • Adult with 18 yrs of age or more
  • Not a dependent on any other person return
  • Not a full time student etc.

There are various denominations of availing the credit according to the amount to be invested.

The maximum credit availed by an individual is $2000.

If the person availing credit is married and filing joint return he will have the maximum credit amount to $4000.

As the values provided,

AGI = $ 39000

According to the threshold limits of the scheme, Rafael and Lucy can have credit to 20% of their contribution.

Total contribution = 2900 + 2900

Total contribution = 5800

Credit availed = 20% * 5800

Credit availed = $ 1160

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