Question

Barbara is a single taxpayer who had a 2020 adjusted gross income of $25,000 and contributed $4,000 to her traditional IRA. Assuming she has a $2,000 income tax liability for the year, what is her maximum retirement contribution savings credit

Answer 1

$200

Step-by-step explanation:

The retirement contribution savings credit is designed to benefit low and middle income tax payers that contribute to retirement accounts.

The maximum credit ranges from $200 to $1,000 per taxpayer.

Since Barbara earned below $32,500, she applies for this tax credit.

Since her AGI is over $21,251, she can only deduct 10% of the first $2,000 contributed to her IRA account = $2,000 x 10% = $200