How to get up to $2,000 FREE from the U.S. Government
How would you like to increase your retirement savings and receive a tax credit of up to 50% of your contribution from the United States government FREE? Are you at least 18 years old, not a full-time student, and not claimed as a dependent on another person’s tax return? If so, and you meet the income requirements listed below, you are entitled to a tax credit of up to 50% of your contribution to almost any type of retirement plan, including a Roth IRA. If you then take your refund from the government and put it back into your IRA, your retirement savings will increase by as much as 50%! And all you have to do is ask for it!
You must have modified Adjusted Gross Income within the following limits:
Credit Income for Married Income for Head of Income for
Rate Filing Jointly Household Others
50% up to $30,000 up to $22,500 up to $15,000
20% $30,001 to $32,500 $22,501 to $24,375 $15,001 to $16,250
10% $32,501 to $50,000 $24,376 to $37,500 $16,251 to $25,000
The maximum tax credit allowed for 2005 is $1,000 (with a $2,000 contribution), or up to $2,000 if married filing jointly and each spouse makes contributions. Simply attach Form 8880, Credit for Qualified Retirement Savings Contributions, to your 2005 income tax return, and you will receive up to a $2,000 tax credit. A tax credit is a dollar for dollar reduction in your tax bill, as opposed to a tax deduction, which only reduces the amount of money on which you pay income taxes. You may get more information on this credit from IRS Publication 590, Section 4.
Let me give you an example. Lucky Larry, a married man, was downsized from his job in the corporate world in December, 2004. Larry decided that he wanted to be a real estate investor instead of looking for another j-o-b. Things are going fine in 2005, but Larry’s modified adjusted gross income after all of his expenses will be $30,000, and his taxable income after the standard deduction and 2 exemptions will be $13,600. Therefore his taxes before the tax credit will be $1,363 (see instructions for Form 1040, page 66). He and his wife contribute $1,363 each to a self-directed Roth IRA at Entrust, which they can use to purchase real estate options, debt-leveraged real estate, and many other things. Larry and his wife will receive a tax credit of $1,363 (50% of each of their contributions). Although the maximum contribution for purposes of the tax credit is $2,000 each, the tax credit is non-refundable. This means that the maximum tax credit Larry and his wife can receive is equal to the taxes they would otherwise pay. By attaching Form 8880 to his 2005 income tax return, a few weeks later Larry receives a FREE CHECK from the US Government for $1,363, so their income tax for 2005 is ZERO! Larry and his wife wisely decide to contribute the tax refund back into their Entrust self-directed Roth IRA’s. Each Roth IRA grows by 50% to $2,044.50 absolutely FREE, courtesy of the United States government!
H. Quincy Long is an attorney and is President of Entrust Retirement Services, Inc., with offices in Houston and San Antonio (www.TheEntrustGroup.com). Nothing in this article is intended as tax, legal or investment advice. He may be reached by email at [email protected].
