Question

Holly is a 29-year-old taxpayer who will use the head of household filing status. Her 2019 modified adjusted gross income is $47,000. During the year, she made a $1,000 contribution to her employer's 401(k) plan. She has never taken a distribution from any retirement plan. The maximum amount Holly may receive for the retirement savings contributions credit (Saver's Credit) is:

A. $0

B. $50

C. $100

D. $1,000

Answer 1

C. $100

In order to be qualified for the saver's credit, an individual must be at least 18 years old by the end of the respective tax year. He/she may not enroll as a full-time student and may not be affirm as a dependent on other taxpayer's return. And also credit amount depends on individual's adjusted gross income and those limits in case of head of household are;

1. Up to $28,875 - 50% of Contributed.

2. $28,876 – $31,125 - 20% of Contributed.

3. $31,126– $48,000 - 10% of Contributed.

​​​​​​​4. More than $48,000 - 0% of Contributed.

Since Holly's age is 29 years and, whose tax-filing status is single, has an adjusted gross income of $47,000 for tax year 2019 (which comes under 10% limit). She contributes $1000 to her employer-sponsored 401(k) plan. So, Credit would be $100 ($1000 * 10% = $100).