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Individual retirement accounts (IRAs) and 401(k) savings plans have several advantages. First, they are an easy way to begin saving for retirement when you should: as early as possible. Any employer contributions add to your savings, and there are long-term tax advantages, in that taxes are deferred on the money you save.

Now there is an additional tax incentive that you do not have to wait until retirement to take advantage of: The Saver’s Credit is a credit of up to $1,000 (or $2,000 for a married couple filing jointly) for IRA and 401(k) contributions. A credit is better than a deduction: it is a dollar-for-dollar reduction of the income taxes you owe or a refund of what you have already paid.

Income limits apply. For 2013 they are: $59,000 if married filing jointly; $44,250 if filing as head of household; and $29,500 if single or married filing separately. The amount of the credit is also dependent on income, with lower-income earners eligible for a higher credit. There are three tiers, with the credit calculated as 10 percent, 20 percent or 50 percent of the first $2,000 saved.

Individuals claiming the credit must be 18 years of age, not a full-time student and not claimed as a dependent on another person’s tax return.

Contributions made to employer-sponsored 401(k)s, traditional IRAs and Roth IRAs all count toward the credit, and so do contributions to a Savings Incentive Match Plan for Employees (SIMPLE) plan, a governmental 457 plan, a 403(b) plan or a Simplified Employee Pension (SEP). Only funds you contribute to the plan, not your employer’s contributions, may be counted. If you have more than one of these savings plans, the credit is calculated according to the total you contribute to all of them.

If you withdraw money from your retirement savings plan, you may still claim the credit, but the amount you withdrew counts against the amount of savings you can apply to it. The same goes for a withdrawal from a Roth IRA, but if you rolled the amount into another eligible retirement plan, then it does not count against the credit.

In 2010, more than $1 billion in Saver’s Credits were claimed on over 6 million income tax returns. Although the credit can be worth up to $2,000 for a married couple filing jointly, most taxpayers received a smaller deduction. The average credit for married couples was $204, $122 for individuals and $165 for heads of households.

The Saver’s Credit started in 2002 as a temporary provision and was made permanent in 2006, but most workers have never heard of it, though a majority are aware of the long-term tax advantages of IRAs and 401(k)s.

To take advantage of the credit, complete Form 8880, Credit for Qualified Retirement Savings Contributions to determine your credit rate and transfer the amount to your 1040 or 1040a. (The credit is not available for filers using the 1040EZ.)

Your retirement plan already has long-term tax advantages; the Saver’s Credit offers an incentive now.

For more information on planning for retirement, visit www.littmankrooks.com.